FIRST COMMONWEALTH FINANCIAL CORP /PA/ - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			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 001-11138

First Commonwealth Financial Corporation

(Exact name of registrant as specified in its charter)


Pennsylvania		25-1428528
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

601 Philadelphia Street
Indiana	PA	15701
(Address of principal executive offices)		(Zip Code)

724-349-7220

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	FCF	New York Stock Exchange

Indicate by a check mark whether the registrant (1) has 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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐

Non-accelerated filer ¨ (Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares outstanding of issuer’s common stock, $1.00 par value, as of November 6, 2023, was 102,111,439.

Table of Contents

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

INDEX


		PAGE

PART I.	Financial Information

ITEM 1.	Financial Statements and Supplementary Data

	Included in Part I of this report:

	First Commonwealth Financial Corporation and Subsidiaries

	Consolidated Statements of Financial Condition (Unaudited)	3
	Consolidated Statements of Income (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Unaudited)	6
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	7
	Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to the Unaudited Consolidated Financial Statements	10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	85

ITEM 4.	Controls and Procedures	85

PART II.	Other Information

ITEM 1.	Legal Proceedings	86

ITEM 1A.	Risk Factors	86

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86

ITEM 3.	Defaults Upon Senior Securities	86

ITEM 4.	Mine Safety Disclosures	87

ITEM 5.	Other Information	87

ITEM 6.	Exhibits	88

	Signatures	89

Table of Contents

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)


	September 30, 2023		December 31, 2022

	(dollars in thousands, except share data)
Assets
Cash and due from banks	$	122,982	$	124,254
Interest-bearing bank deposits	214,088		29,990
Securities available for sale, at fair value	817,603		762,661
Securities held to maturity, at amortized cost (Fair value of $341,646 and $386,205 at September 30, 2023 and December 31, 2022, respectively)	429,558		461,162
Other investments	48,979		26,414
Loans held for sale	33,127		11,869
Loans and leases:
Portfolio loans and leases	8,901,725		7,642,143
Allowance for credit losses	(134,337)		(102,906)
Net loans and leases	8,767,388		7,539,237
Premises and equipment, net	123,140		115,106
Other real estate owned	765		534
Goodwill	363,715		303,328
Amortizing intangibles, net	23,613		9,205
Bank owned life insurance	228,534		222,651
Other assets	248,496		199,255
Total assets	$	11,421,988	$	9,805,666
Liabilities
Deposits (all domestic):
Noninterest-bearing	$	2,535,704	$	2,670,508
Interest-bearing	6,705,361		5,334,961
Total deposits	9,241,065		8,005,469
Short-term borrowings	544,060		372,694
Subordinated debentures	177,679		170,937
Other long-term debt	4,310		4,862
Capital lease obligation	5,028		5,425
Total long-term debt	187,017		181,224
Other liabilities	209,315		194,205
Total liabilities	10,181,457		8,753,592
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	—		—
Common stock, $1 par value per share, 200,000,000 shares authorized; 123,603,380 and 113,914,902 shares issued at September 30, 2023 and December 31, 2022, respectively, and 102,184,652 and 93,376,314 shares outstanding at September 30, 2023 and December 31, 2022, respectively	123,603		113,915
Additional paid-in capital	630,246		497,431
Retained earnings	849,049		774,863
Accumulated other comprehensive loss, net	(154,054)		(137,692)
Treasury stock (21,418,728 and 20,538,588 shares at September 30, 2023 and December 31, 2022, respectively)	(208,313)		(196,443)

Total shareholders’ equity	1,240,531		1,052,074
Total liabilities and shareholders’ equity	$	11,421,988	$	9,805,666

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
	(dollars in thousands, except share data)
Interest Income
Interest and fees on loans and leases	$	129,373	$	78,722	$	357,735	$	212,631
Interest and dividends on investments:
Taxable interest	6,229		6,080		17,652		18,844
Interest exempt from federal income taxes	114		117		345		363
Dividends	823		204		2,110		488
Interest on bank deposits	3,346		577		7,899		1,346
Total interest income	139,885		85,700		385,741		233,672
Interest Expense
Interest on deposits	32,685		1,028		74,104		2,638
Interest on short-term borrowings	6,643		50		14,237		89
Interest on subordinated debentures	2,707		2,157		7,175		6,429
Interest on other long-term debt	41		48		130		151
Interest on lease obligations	52		57		156		171

Total interest expense	42,128		3,340		95,802		9,478
Net Interest Income	97,757		82,360		289,939		224,194
Provision for credit losses	5,885		5,923		6,025		11,986
Provision for credit losses - acquisition day 1 non-PCD	—		—		10,653		—
Net Interest Income after Provision for Credit Losses	91,872		76,437		273,261		212,208
Noninterest Income



Net securities (losses) gains	(103)		—		(103)		2
Trust income	2,949		2,777		7,967		8,063
Service charges on deposit accounts	5,600		5,194		15,842		14,695
Insurance and retail brokerage commissions	2,305		2,048		7,171		6,806
Income from bank owned life insurance	1,242		1,419		3,664		4,310
Gain on sale of mortgage loans	1,270		1,485		3,175		4,328
Gain on sale of other loans and assets	1,027		1,093		5,004		4,511
Card-related interchange income	7,221		6,980		21,422		20,607
Derivatives mark to market	35		6		27		395

Swap fee income	452		2,326		1,029		3,933
Other income	2,828		2,586		7,114		6,749
Total noninterest income	24,826		25,914		72,312		74,399
Noninterest Expense
Salaries and employee benefits	35,640		32,486		106,639		94,367
Net occupancy	4,782		4,629		14,584		13,586
Furniture and equipment	4,414		4,005		12,936		11,592
Data processing	3,857		3,721		11,024		10,379
Advertising and promotion	1,662		1,278		4,652		3,938

Pennsylvania shares tax	1,588		1,569		4,013		3,487
Intangible amortization	1,344		746		3,773		2,470

Other professional fees and services	1,603		1,204		4,376		3,622
FDIC insurance	1,920		796		4,614		2,196
Loss on sale or write-down of assets	50		54		97		215

Litigation and operational losses	1,626		758		3,263		1,987

Merger and acquisition related	379		448		8,860		448



Other operating	8,548		8,207		25,906		23,017
Total noninterest expense	67,413		59,901		204,737		171,304
Income Before Income Taxes	49,285		42,450		140,836		115,303
Income tax provision	10,054		8,482		28,600		22,855
Net Income	$	39,231	$	33,968	$	112,236	$	92,448

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

Table of Contents


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
	(dollars in thousands, except share data)
Average Shares Outstanding	102,159,213		93,194,854		101,428,065		93,761,360
Average Shares Outstanding Assuming Dilution	102,442,878		93,450,259		101,674,970		93,994,158

Per Share Data: Basic Earnings per Share	$	0.38	$	0.36	$	1.11	$	0.99
Diluted Earnings per Share	$	0.38	$	0.36	$	1.10	$	0.98
Cash Dividends Declared per Common Share	$	0.125	$	0.120	$	0.370	$	0.355

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Net Income	$	39,231	$	33,968	$	112,236	$	92,448
Other comprehensive loss, before tax benefit:
Unrealized holding losses on securities arising during the period	(21,389)		(46,213)		(25,150)		(135,258)

Less: reclassifcation adjustment for losses (gains) included in net income	103		—		103		(2)
Unrealized holding gains (losses) on derivatives arising during the period	2,111		(11,083)		4,336		(33,754)

Total other comprehensive loss, before tax benefit	(19,175)		(57,296)		(20,711)		(169,014)
Income tax benefit related to items of other comprehensive loss	3,672		12,032		4,349		35,493
Total other comprehensive loss	(15,503)		(45,264)		(16,362)		(133,521)
Comprehensive Income (Loss)	$	23,728	$	(11,296)	$	95,874	$	(41,073)

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)


	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at December 31, 2022	93,376,314	$	113,915	$	497,431	$	774,863	$	(137,692)	$	(196,443)	$	1,052,074


Net income						112,236						112,236
Other comprehensive loss								(16,362)				(16,362)
Cash dividends declared ($0.370 per share)						(38,050)						(38,050)




Treasury stock acquired	(1,137,475)									(14,105)		(14,105)
Treasury stock reissued	163,950			660		—				1,551		2,211
Restricted stock	93,385	—		488		—				684		1,172
Common stock issued	9,688,478	9,688		131,667								141,355
Balance at September 30, 2023	102,184,652	$	123,603	$	630,246	$	849,049	$	(154,054)	$	(208,313)	$	1,240,531


	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at December 31, 2021	94,233,152	$	113,915	$	496,121	$	691,260	$	(8,768)	$	(183,156)	$	1,109,372


Net income						92,448						92,448
Other comprehensive loss								(133,521)				(133,521)
Cash dividends declared ($0.355 per share)						(33,373)						(33,373)




Treasury stock acquired	(1,132,577)									(15,598)		(15,598)
Treasury stock reissued	174,989			580		—				1,612		2,192
Restricted stock	101,500	—		730		—				325		1,055

Balance at September 30, 2022	93,377,064	$	113,915	$	497,431	$	750,335	$	(142,289)	$	(196,817)	$	1,022,575

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)



	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at June 30, 2023	102,444,915	$	123,603	$	630,246	$	822,619	$	(138,551)	$	(205,498)	$	1,232,419


Net income						39,231						39,231
Other comprehensive loss								(15,503)				(15,503)
Cash dividends declared ($0.125 per share)						(12,801)						(12,801)




Treasury stock acquired	(260,263)									(3,216)		(3,216)
Treasury stock reissued	—			—		—				—		—
Restricted stock	—	—		—		—				401		401

Balance at September 30, 2023	102,184,652	$	123,603	$	630,246	$	849,049	$	(154,054)	$	(208,313)	$	1,240,531




	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at June 30, 2022	93,705,120	$	113,915	$	497,431	$	727,573	$	(97,025)	$	(192,736)	$	1,049,158


Net income						33,968						33,968
Other comprehensive loss								(45,264)				(45,264)
Cash dividends declared ($0.120 per share)						(11,206)						(11,206)




Treasury stock acquired	(326,656)									(4,453)		(4,453)
Treasury stock reissued	—			—		—				—		—
Restricted stock	(1,400)	—		—		—				372		372

Balance at September 30, 2022	93,377,064	$	113,915	$	497,431	$	750,335	$	(142,289)	$	(196,817)	$	1,022,575

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	For the Nine Months Ended
	September 30,
	2023		2022
Operating Activities	(dollars in thousands)
Net income	$	112,236	$	92,448
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses	16,678		11,986
Deferred tax expense	3,179		297
Depreciation and amortization	2,831		7,790
Net gains on securities and other assets	(7,701)		(9,248)
Net amortization of premiums and discounts on securities	1,052		1,570

Income from increase in cash surrender value of bank owned life insurance	(3,627)		(4,113)
Increase in interest receivable	(5,156)		(888)
Mortgage loans originated for sale	(137,721)		(156,944)
Proceeds from sale of mortgage loans	128,270		159,078
Increase in interest payable	3,937		1,675
Decrease in income taxes payable	(1,905)		(5,222)

Other-net	(5,336)		10,251
Net cash provided by operating activities	106,737		108,680
Investing Activities
Transactions with securities held to maturity:
Proceeds from maturities and redemptions	31,394		66,139
Purchases	(200)		(200)
Transactions with securities available for sale:
Proceeds from sales	33,756		—
Proceeds from maturities and redemptions	75,593		117,718
Purchases	(155,782)		—
Purchases of FHLB stock	(83,218)		(3,244)
Proceeds from the redemption of FHLB stock	73,311		626
Proceeds from bank owned life insurance	2,246		4,823
Proceeds from sale of loans	110,695		52,906
Proceeds from sale of other assets	2,836		3,862
Net cash received from business acquisition	14,492		—

Net increase in loans and leases	(435,093)		(563,044)

Purchases of premises and equipment and other assets	(19,020)		(8,037)
Net cash used in investing activities	(348,990)		(328,451)
Financing Activities

Net decrease in other short-term borrowings	(1,368)		(40,383)
Net increase in deposits	479,307		95,183
Repayments of other long-term debt	(553)		(531)
Repayments of capital lease obligation	(397)		(372)



Dividends paid	(38,050)		(33,373)
Proceeds from reissuance of treasury stock	245		245
Purchase of treasury stock	(14,105)		(15,598)

Net cash provided by financing activities	425,079		5,171
Net increase (decrease) in cash and cash equivalents	182,826		(214,600)
Cash and cash equivalents at January 1	154,244		395,372
Cash and cash equivalents at September 30	$	337,070	$	180,772

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

The accounting and reporting policies of First Commonwealth Financial Corporation and subsidiaries (“First Commonwealth” or the “Company”) conform with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual realized amounts could differ from those estimates. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of First Commonwealth’s financial position, results of operations, comprehensive income, cash flows and changes in shareholders’ equity as of and for the periods presented. Certain information and Note disclosures normally included in Consolidated Financial Statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest-bearing bank deposits. Generally, federal funds are sold for one-day periods.

The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year of 2023. These interim financial statements should be read in conjunction with First Commonwealth’s 2022 Annual Report on Form 10-K.

Note 2 Acquisition

On January 31, 2023, the Company completed its acquisition of Centric Financial Corporation (“Centric”) and its banking subsidiary, Centric Bank, for consideration of 9,688,478 shares of the Company's common stock. Through the acquisition, the Company obtained seven full-service banking offices and one loan production office in the Harrisburg, Philadelphia and Lancaster Metropolitan Service Areas ("MSAs").

The table below summarizes the net assets acquired (at fair value) and consideration transferred in connection with the Centric acquisition (dollars in thousands):


Consideration paid
Cash paid to shareholders - fractional shares	$	1
Shares issued to shareholders (9,688,478 shares)	141,355
Total consideration paid			$	141,356
Fair value of assets acquired
Cash and due from banks	14,492
Investment securities	34,302
FHLB stock	7,658
Loans	923,555
Premises and equipment	17,186
Core deposit intangible	16,671
Bank owned life insurance	4,502
Other assets	17,391
Total assets acquired	1,035,757
Fair value of liabilities assumed
Deposits	757,003
Borrowings	179,301
Other liabilities	18,484
Total liabilities assumed	954,788
Total fair value of identifiable net assets			80,969
Goodwill			$	60,387

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company determined that this acquisition constitutes a business combination and therefore was accounted for using the acquisition method of accounting. Accordingly, as of the date of the acquisition, the Company recorded the assets acquired, liabilities assumed and consideration paid at fair value. The $60.4 million excess of the consideration paid over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes. The amount of goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with Centric.

The fair value of the 9,688,478 common shares issued was determined based on the $14.59 closing market price of the Company's common shares on the acquisition date, January 31, 2023.

The valuation of the acquired assets and liabilities was completed in the second quarter of 2023. The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company used an independent valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

Cash and due from banks - The estimated fair value was determined to approximate the carrying amount of these assets.

Investment securities - The estimated fair value of the investment portfolio was based on quoted market prices, dealer quotes, and pricing obtained from independent pricing services.

Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for non- purchased credit-deteriorated ("non-PCD") loans and on an individual basis for purchased credit-deteriorated ("PCD") loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. Other factors included assumptions related to prepayments, probability of default and loss given default. The discount rates applied were based on a build-up approach considering the funding mix, servicing costs, liquidity premium and factors related to performance risk.

Acquired loans are classified into two categories: PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. For PCD loans, an allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan.

A day 1 allowance for credit losses on non-PCD loans of $10.7 million was recorded through the provision for credit losses within the Consolidated Statements of Income. At the date of acquisition, of the $979.5 million of loans acquired from Centric, $304.7 million, or 31.1%, of Centric's loan portfolio, was accounted for as PCD loans as of February 1, 2023.

Premise and equipment - The estimated fair value of land and buildings were determined by independent market-based appraisals.

Core deposit intangible - The core deposit intangible was valued utilizing the cost savings method approach, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

Time deposits - The estimated fair value of time deposits was determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on time deposits with similar terms and maturities.

Borrowings - The estimated fair value of short-term borrowings was determined to approximate stated value. Subordinated debentures were valued using a discounted cash flow approach incorporating a discount rate that incorporated similar terms, maturities and credit ratings.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides details related to the fair value of acquired PCD loans as of February 1, 2023.


	Unpaid Principal Balance		PCD Allowance for Credit Loss at Acquisition		(Discount) Premium on Acquired Loans		Fair Value of PCD Loans at Acquisition
	(dollars in thousands)
Commercial, financial, agricultural and other	$	84,095	$	(19,417)	$	117	$	64,795
Time and demand	84,095		(19,417)		117		64,795



Real estate construction	29,947		(287)		(479)		29,181
Construction other	16,978		(227)		(179)		16,572
Construction residential	12,969		(60)		(300)		12,609
Residential real estate	16,564		(527)		(496)		15,541
Residential first lien	13,740		(197)		(264)		13,279
Residential junior lien/home equity	2,824		(330)		(232)		2,262
Commercial real estate	174,002		(6,971)		(6,073)		160,958
Multifamily	13,169		(234)		(1,413)		11,522
Nonowner occupied	97,324		(2,739)		(1,902)		92,683
Owner occupied	63,509		(3,998)		(2,758)		56,753
Loans to individuals	62		(3)		(3)		56
Automobile and recreational vehicles	62		(3)		(3)		56


Total loans and leases	$	304,670	$	(27,205)	$	(6,934)	$	270,531

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans as of February 1, 2023.


	Unpaid Principal Balance		(Discount) premium on acquired loans		Fair Value of Non-PCD Loans at Acquisition		Day 1 Provision for Credit Losses - Non-PCD Loans
	(dollars in thousands)
Commercial, financial, agricultural and other	$	167,606	$	(5,451)	$	162,155	$	3,482
Time and demand	165,878		(5,342)		160,536		3,436

Equipment finance	4		—		4		—
Time and demand other	1,724		(109)		1,615		46
Real estate construction	52,773		(1,126)		51,647		1,638
Construction other	34,801		(971)		33,830		1,146
Construction residential	17,972		(155)		17,817		492
Residential real estate	75,041		(2,593)		72,448		614
Residential first lien	53,612		(1,981)		51,631		437
Residential junior lien/home equity	21,429		(612)		20,817		177
Commercial real estate	378,777		(12,607)		366,170		4,911
Multifamily	45,475		(1,203)		44,272		514
Nonowner occupied	182,793		(5,660)		177,133		2,111
Owner occupied	150,509		(5,744)		144,765		2,286
Loans to individuals	640		(36)		604		8
Automobile and recreational vehicles	449		(25)		424		4

Consumer other	191		(11)		180		4
Total loans and leases	$	674,837	$	(21,813)	$	653,024	$	10,653

The following table presents the change in goodwill during the period (dollars in thousands):


	For the Nine Months Ended September 30, 2023
Goodwill at December 31, 2022	$	303,328
Goodwill from Centric acquisition	60,387
Goodwill at September 30, 2023	$	363,715

Costs related to the acquisition totaled $8.9 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

As a result of the full integration of the operations of Centric, it is not practicable to determine revenue or net income included in the Company's operating results relating to Centric since the date of acquisition as Centric results cannot be separately identified.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 Supplemental Comprehensive Income Disclosures

The following table identifies the related tax effects allocated to each component of other comprehensive income (“OCI”) in the unaudited Consolidated Statements of Comprehensive Income. Reclassification adjustments related to securities available for sale are included in the "Net securities gains" line in the unaudited Consolidated Statements of Income.


	For the Nine Months Ended September 30,
	2023						2022
	Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount
	(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period	$	(25,150)	$	5,282	$	(19,868)	$	(135,258)	$	28,405	$	(106,853)

Reclassification adjustment for losses (gains) on securities included in net income	103		(22)		81		(2)		—		(2)
Total unrealized losses on securities	(25,047)		5,260		(19,787)		(135,260)		28,405		(106,855)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the period	4,336		(911)		3,425		(33,754)		7,088		(26,666)

Total unrealized gains (losses) on derivatives	4,336		(911)		3,425		(33,754)		7,088		(26,666)




Total other comprehensive loss	$	(20,711)	$	4,349	$	(16,362)	$	(169,014)	$	35,493	$	(133,521)



	For the Three Months Ended September 30,
	2023						2022
	Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount
	(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period	$	(21,389)	$	4,138	$	(17,251)	$	(46,213)	$	9,705	$	(36,508)

Reclassification adjustment for losses on securities included in net income	103		(22)		81		—		—		—
Total unrealized losses on securities	(21,286)		4,116		(17,170)		(46,213)		9,705		(36,508)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the period	2,111		(444)		1,667		(11,083)		2,327		(8,756)

Total unrealized gains (losses) on derivatives	2,111		(444)		1,667		(11,083)		2,327		(8,756)




Total other comprehensive loss	$	(19,175)	$	3,672	$	(15,503)	$	(57,296)	$	12,032	$	(45,264)

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table details the change in components of OCI for the nine months ended September 30:


	2023								2022
	Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)		Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)
	(dollars in thousands)
Balance at December 31	$	(107,471)	$	268	$	(30,489)	$	(137,692)	$	(3,317)	$	95	$	(5,546)	$	(8,768)


Other comprehensive loss before reclassification adjustment	(19,868)		—		3,425		(16,443)		(106,853)		—		(26,666)		(133,519)
Amounts reclassified from accumulated other comprehensive (loss) income	81		—		—		81		(2)		—		—		(2)
Net other comprehensive loss during the period	(19,787)		—		3,425		(16,362)		(106,855)		—		(26,666)		(133,521)
Balance at September 30	$	(127,258)	$	268	$	(27,064)	$	(154,054)	$	(110,172)	$	95	$	(32,212)	$	(142,289)

The following table details the change in components of OCI for the three months ended September 30:




	2023								2022
	Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)		Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)
	(dollars in thousands)
Balance at June 30	$	(110,088)	$	268	$	(28,731)	$	(138,551)	$	(73,664)	$	95	$	(23,456)	$	(97,025)


Other comprehensive loss before reclassification adjustment	(17,251)		—		1,667		(15,584)		(36,508)		—		(8,756)		(45,264)
Amounts reclassified from accumulated other comprehensive (loss) income	81		—		—		81		—		—		—		—
Net other comprehensive loss during the period	(17,170)		—		1,667		(15,503)		(36,508)		—		(8,756)		(45,264)
Balance at September 30	$	(127,258)	$	268	$	(27,064)	$	(154,054)	$	(110,172)	$	95	$	(32,212)	$	(142,289)

Note 4 Supplemental Cash Flow Disclosures

The following table presents information related to cash paid during the period for interest and income taxes, as well as detail on non-cash investing and financing activities for the nine months ended September 30:


	2023		2022
	(dollars in thousands)
Cash paid during the period for:
Interest	$	92,376	$	7,685
Income taxes	26,874		23,621
Non-cash investing and financing activities:

Loans transferred to other real estate owned and repossessed assets	2,933		2,211
Loans transferred from held to maturity to held for sale	117,143		47,213

Loans transferred from available for sale to held to maturity	(519)		(94)
Gross decrease in market value adjustment to securities available for sale	(25,047)		(135,260)
Gross increase (decrease) in market value adjustment to derivatives	4,336		(33,754)

Increase in limited partnership investment unfunded commitment	1,320		—
Noncash treasury stock reissuance	1,966		1,947
Net assets acquired through acquisition	66,477		—

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5 Earnings per Share

The following table summarizes the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computations:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
Weighted average common shares issued	123,603,380		113,914,902		122,503,223		113,914,902
Average treasury stock shares	(21,222,298)		(20,485,573)		(20,849,426)		(19,938,539)
Average deferred compensation shares	(56,402)		(55,751)		(56,029)		(55,716)
Average unearned non-vested shares	(165,467)		(178,724)		(169,703)		(159,287)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share	102,159,213		93,194,854		101,428,065		93,761,360
Additional common stock equivalents (non-vested stock) used to calculate diluted earnings per share	226,939		199,620		190,178		177,013
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	56,726		55,785		56,727		55,785

Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	102,442,878		93,450,259		101,674,970		93,994,158
Per Share Data:
Basic Earnings per Share	$	0.38	$	0.36	$	1.11	$	0.99
Diluted Earnings per Share	$	0.38	$	0.36	$	1.10	$	0.98

The following table shows the number of shares and the price per share related to common stock equivalents that were not included in the computation of diluted earnings per share for the nine months ended September 30, because to do so would have been antidilutive.


	2023					2022
		Price Range					Price Range
	Shares	From		To		Shares	From		To

Restricted Stock	137,169	$	12.70	$	16.43	148,423	$	12.77	$	16.43
Restricted Stock Units	32,470	$	17.53	$	17.53	24,529	$	21.08	$	21.08

Note 6 Commitments and Contingent Liabilities

Commitments and Letters of Credit

Standby letters of credit and commercial letters of credit are conditional commitments issued by First Commonwealth to guarantee the performance of a customer to a third party. The contract or notional amount of these instruments reflects the maximum amount of future payments that First Commonwealth could be required to pay under the guarantees if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from collateral held or pledged. In addition, many of these commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements.

The following table identifies the notional amount of those instruments at the date shown below:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	2,525,601	$	2,356,539
Financial standby letters of credit	12,265		18,417
Performance standby letters of credit	15,801		12,853
Commercial letters of credit	161		573

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The notional amounts outstanding as of September 30, 2023 include amounts issued in 2023 of $0.9 million in performance standby letters of credit and $0.3 million in financial standby letters of credit. There were no commercial letters of credit issued in 2023. A liability of $0.1 million has been recorded as of both September 30, 2023 and December 31, 2022, which represents the estimated fair value of letters of credit issued. The fair value of letters of credit is estimated based on the unrecognized portion of fees received at the time the commitment was issued.

Unused commitments and letters of credit provide exposure to future credit loss in the event of nonperformance by the borrower or guaranteed parties. Management’s evaluation of the credit risk related to these commitments resulted in the recording of a liability of $8.9 million and $10.0 million as of September 30, 2023 and December 31, 2022, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporates the expected loss percentage calculated for comparable loan categories as part of the allowance for credit losses for loans as well as estimated utilization for each loan category.

Legal Proceedings

First Commonwealth and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. As of September 30, 2023, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against First Commonwealth or its subsidiaries will be material to First Commonwealth’s consolidated financial position. On at least a quarterly basis, First Commonwealth assesses its liabilities and contingencies in connection with such legal proceedings. For those matters where it is probable that First Commonwealth will incur losses and the amounts of the losses can be reasonably estimated, First Commonwealth records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability (if any), is between $0 and $1 million. Although First Commonwealth does not believe that the outcome of pending litigation will be material to First Commonwealth’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations and cash flows for a particular reporting period in the future.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 Investment Securities

Securities Available for Sale

Below is an analysis of the amortized cost and estimated fair values of securities available for sale at:


	September 30, 2023								December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	3,678	$	10	$	(262)	$	3,426	$	4,127	$	37	$	(181)	$	3,983
Mortgage-Backed Securities – Commercial	429,282		—		(64,471)		364,811		324,306		—		(52,890)		271,416
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	501,750		1		(90,493)		411,258		527,777		59		(78,847)		448,989

Other Government-Sponsored Enterprises	1,000		—		(113)		887		1,000		—		(118)		882
Obligations of States and Political Subdivisions	9,228		—		(1,475)		7,753		9,482		—		(1,295)		8,187
Corporate Securities	33,752		—		(4,284)		29,468		32,010		179		(2,985)		29,204



Total Securities Available for Sale	$	978,690	$	11	$	(161,098)	$	817,603	$	898,702	$	275	$	(136,316)	$	762,661

Mortgage-backed securities include mortgage-backed obligations of U.S. Government agencies and obligations of U.S. Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to approximately 40 years, with lower anticipated lives to maturity due to prepayments. All mortgage-backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact upon prepayment speeds; therefore, First Commonwealth uses computer simulation models to test the average life and yield volatility of all mortgage-backed securities under various interest rate scenarios to monitor the potential impact on earnings and interest rate risk positions.

Expected maturities will differ from contractual maturities because issuers may have the right to call or repay obligations with or without call or prepayment penalties. Other fixed income securities within the portfolio also contain prepayment risk.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2023, by contractual maturity, are shown below.


	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	6,253	$	6,206
Due after 1 but within 5 years	8,890		8,649
Due after 5 but within 10 years	28,837		23,253
Due after 10 years	—		—
	43,980		38,108
Mortgage-Backed Securities (a)	934,710		779,495
Total Debt Securities	$	978,690	$	817,603

(a)Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds. Mortgage-Backed Securities include an amortized cost of $433.0 million and a fair value of $368.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $501.7 million and a fair value of $411.3 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Proceeds from sales, gross gains (losses) realized on sales and maturities related to securities held to maturity and securities available for sale were as follows for the nine months ended September 30:


	2023		2022
	(dollars in thousands)
Proceeds from sales	$	33,756	$	—
Gross gains (losses) realized:
Sales transactions:
Gross gains	$	—	$	—
Gross losses	(103)		—
	(103)		—
Maturities
Gross gains	—		2
Gross losses	—		—

	—		2
Net gains	$	(103)	$	2

Proceeds from sales included in above table are a result of the sale of investments acquired as part of the Centric acquisition. All of the acquired investments were recorded at fair value at the time of acquisition and subsequently sold at the same value, with the exception of one corporate security. This security was sold in the third quarter of 2023 at a loss of $103 thousand.

Securities available for sale with an estimated fair value of $377.6 million and $626.7 million were pledged as of September 30, 2023 and December 31, 2022, respectively, to secure public deposits and for other purposes required or permitted by law.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Securities Held to Maturity

Below is an analysis of the amortized cost and fair values of debt securities held to maturity at:


	September 30, 2023								December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	1,800	$	—	$	(279)	$	1,521	$	2,008	$	—	$	(224)	$	1,784
Mortgage-Backed Securities- Commercial	70,793		—		(17,191)		53,602		75,229		—		(14,196)		61,033
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	304,036		—		(61,572)		242,464		329,267		—		(53,002)		276,265
Mortgage-Backed Securities – Commercial	2,853		—		(55)		2,798		4,794		—		(129)		4,665
Other Government-Sponsored Enterprises	22,461		—		(5,205)		17,256		22,221		—		(4,501)		17,720
Obligations of States and Political Subdivisions	26,615		—		(3,558)		23,057		26,643		—		(2,865)		23,778
Debt Securities Issued by Foreign Governments	1,000		—		(52)		948		1,000		—		(40)		960




Total Securities Held to Maturity	$	429,558	$	—	$	(87,912)	$	341,646	$	461,162	$	—	$	(74,957)	$	386,205

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	1,145	$	1,140
Due after 1 but within 5 years	11,811		10,928
Due after 5 but within 10 years	36,557		28,802
Due after 10 years	563		391
	50,076		41,261
Mortgage-Backed Securities (a)	379,482		300,385
Total Debt Securities	$	429,558	$	341,646

(a)Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds. Mortgage-Backed Securities include an amortized cost of $72.6 million and a fair value of $55.1 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $306.9 million and a fair value of $245.3 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Securities held to maturity with an amortized cost of $119.2 million and $368.8 million were pledged as of September 30, 2023 and December 31, 2022, respectively, to secure public deposits and for other purposes required or permitted by law.

Other Investments

As a member of the Federal Home Loan Bank ("FHLB"), First Commonwealth is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. The level of stock required to be held is dependent on the amount of First Commonwealth's mortgage-related assets and outstanding borrowings with the FHLB. This stock is restricted in that it can

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. As of September 30, 2023 and December 31, 2022, our FHLB stock totaled $42.8 million and $25.2 million, respectively, and is included in “Other investments” on the unaudited Consolidated Statements of Financial Condition.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities during the three and nine months ended September 30, 2023.

As of both September 30, 2023 and December 31, 2022, "Other investments" also includes $6.2 million and $1.2 million, respectively, in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the nine-months ended September 30, 2023 and 2022, there were no gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.

Impairment of Investment Securities

We review our investment portfolio on a quarterly basis for indications of impairment. For available for sale securities, the review includes analyzing the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and whether we are more likely than not to sell the security. We evaluate whether we are more likely than not to sell debt securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. Held-to-maturity securities are evaluated for impairment on a quarterly basis using historical probability of default and loss given default information specific to the investment category. If this evaluation determines that credit losses exist an allowance for credit loss is recorded and included in earnings as a component of credit loss expense.

First Commonwealth utilizes the specific identification method to determine the net gain or loss on debt securities and the average cost method to determine the net gain or loss on equity securities.

The following table presents the gross unrealized losses and estimated fair values at September 30, 2023 for both available for sale and held to maturity securities by investment category and time frame for which securities have been in a continuous unrealized loss position:


	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	633	$	(15)	$	3,233	$	(526)	$	3,866	$	(541)
Mortgage-Backed Securities – Commercial	95,858		(1,190)		293,015		(80,472)		388,873		(81,662)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	3,042		(79)		628,596		(151,986)		631,638		(152,065)
Mortgage-Backed Securities – Commercial	—		—		2,798		(55)		2,798		(55)
Other Government-Sponsored Enterprises	—		—		18,143		(5,318)		18,143		(5,318)
Obligations of States and Political Subdivisions	4,526		(177)		26,284		(4,856)		30,810		(5,033)
Debt Securities Issued by Foreign Governments	195		(5)		753		(47)		948		(52)
Corporate Securities	8,552		(202)		20,917		(4,082)		29,469		(4,284)



Total Securities	$	112,806	$	(1,668)	$	993,739	$	(247,342)	$	1,106,545	$	(249,010)

At September 30, 2023, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised 96% of total unrealized losses. All unrealized losses are the result of changes in market interest rates. At September 30, 2023, there are 231 debt securities in an unrealized loss position.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the gross unrealized losses and estimated fair values at December 31, 2022 by investment category and the time frame for which securities have been in a continuous unrealized loss position:


	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	3,734	$	(405)	$	—	$	—	$	3,734	$	(405)
Mortgage-Backed Securities - Commercial	92,208		(12,364)		240,241		(54,722)		332,449		(67,086)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	239,760		(21,543)		482,195		(110,306)		721,955		(131,849)
Mortgage-Backed Securities – Commercial	4,666		(129)		—		—		4,666		(129)
Other Government-Sponsored Enterprises	—		—		18,603		(4,619)		18,603		(4,619)
Obligation of States and Political Subdivisions	21,234		(1,979)		9,230		(2,181)		30,464		(4,160)
Debt Securities Issued by Foreign Governments	587		(13)		373		(27)		960		(40)
Corporate Securities	14,406		(590)		12,632		(2,395)		27,038		(2,985)

Total Securities	$	376,595	$	(37,023)	$	763,274	$	(174,250)	$	1,139,869	$	(211,273)

As of September 30, 2023, our corporate securities had an amortized cost and an estimated fair value of $33.8 million and $29.5 million, respectively. As of December 31, 2022, our corporate securities had an amortized cost and estimated fair value of $32.0 million and $29.2 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were eight and six corporate securities, respectively, in an unrealized loss position as of September 30, 2023 and December 31, 2022. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether the unrealized loss position is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.

There was no expected credit related impairment recognized on investment securities during the nine months ended September 30, 2023 and 2022.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8 Loans and Leases and Allowance for Credit Losses

Loans and leases are presented in the Consolidated Statements of Financial Condition net of deferred fees and costs, and discounts related to purchased loans. Net deferred fees were $7.4 million and $5.9 million as of September 30, 2023 and December 31, 2022, respectively, and discounts on purchased loans from acquisitions were $27.6 million and $5.4 million as of September 30, 2023 and December 31, 2022, respectively. The following table provides outstanding balances related to each of our loan types:


	September 30, 2023		December 31, 2022

	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,496,021	$	1,211,706
Time and demand	1,189,604		1,023,824

Commercial credit cards	12,934		13,920
Equipment finance	190,116		79,674
Time and demand other	103,367		94,288
Real estate construction	575,547		513,101
Construction other	508,875		395,439
Construction residential	66,672		117,662
Residential real estate	2,414,781		2,194,669
Residential first lien	1,737,203		1,547,192
Residential junior lien/home equity	677,578		647,477
Commercial real estate	3,050,084		2,425,012
Multifamily	537,565		431,151
Nonowner occupied	1,806,738		1,510,347
Owner occupied	705,781		483,514
Loans to individuals	1,365,292		1,297,655
Automobile and recreational vehicles	1,285,380		1,210,451
Consumer credit cards	9,997		10,657
Consumer other	69,915		76,547
Total loans and leases	$	8,901,725	$	7,642,143

First Commonwealth’s loan portfolio includes five primary loan categories. When calculating the allowance for credit losses these categories are classified into fourteen portfolio segments. The composition of loans by portfolio segment includes:

Commercial, financial, agricultural and other

Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. At September 30, 2023 and December 31, 2022, this category includes $0.9 million and $4.3 million in Paycheck Protection Program ("PPP") loans for small businesses. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans.

Commercial Credit Cards - Consists of unsecured credit cards for commercial customers. These commercial credit cards have separate characteristics outside of normal commercial non-real estate loans, as they tend to have shorter overall duration. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Equipment Finance - Consists of loans and leases to finance the purchase of equipment for commercial customers. The risk and loss characteristics are unique for this group due to the type of collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Time & Demand Other - Consists primarily of loans to state and political subdivisions and other commercial loans that have different characteristics than loans in the Time and Demand category. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of household debt to income and economic conditions measured by GDP.

Real estate construction

Construction Other - Consists of construction loans to commercial builders and developers and are secured by the properties under development.

Construction Residential - Consists of loans to finance the construction of residential properties during the construction period. Borrowers are typically individuals who will occupy the completed single family property.

The risk and loss characteristics of these two construction categories are different than other real estate secured categories due to the collateral being at various stages of completion. The nature of the project and type of borrower of the two construction categories provides for unique risk and loss characteristics for each category. The primary macroeconomic drivers for estimating credit losses for construction loans include forecasts of national unemployment and measures of completed construction projects.

Residential real estate

Residential first lien - Consists of loans with collateral of 1-4 family residencies with a senior lien position. The risk and loss characteristics are unique for this group because the collateral for these loans are the borrower’s primary residence. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.

Residential Junior Lien/Home Equity - Consists of loans with collateral of 1-4 family residencies with an open end line of credit or junior lien position. The junior lien position for the majority of these loans provides a higher risk of loss than other residential real estate loans. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.

Commercial real estate

Multifamily - Consists of loans secured by commercial multifamily properties. Real estate related to rentals to consumers provide unique risk and loss characteristics. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of commercial real estate values and national unemployment.

Nonowner Occupied - Consists of loans secured by non-owner occupied commercial real estate and provides different loss characteristics than other real estate categories. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Owner Occupied - Consists of loans secured by owner occupied commercial real estate properties. The risk and loss characteristics of this category were considered different than other real estate categories because it is owner occupied and would impact the ability to conduct business. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Loans to individuals

Automobile and Recreational Vehicles - Consists of both direct and indirect loans with automobiles and recreational vehicles held as collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and automobile retention value.

Consumer Credit Cards – Consists of unsecured consumer credit cards. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and economic conditions measured by GDP.

Other Consumer - Consists of lines of credit, student loans and other consumer loans, not secured by real estate or autos. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and retail sales.

The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default, and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was 3.78% and during the one-year forecast period it was projected to average 4.59%, with a peak of 4.86%.

Credit Quality Information

As part of the on-going monitoring of credit quality within the loan portfolio, the following credit worthiness categories are used in grading our loans:


Pass						Acceptable levels of risk exist in the relationship. Includes all loans not classified as OAEM, substandard or doubtful.

Other Assets Especially Mentioned (OAEM)						Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in deterioration of the repayment prospects or weaken the Company’s credit position at some future date. The credit risk may be relatively minor, yet constitute an undesirable risk in light of the circumstances surrounding the specific credit. No loss of principal or interest is expected.

Substandard						Well-defined weakness or a weakness that jeopardizes the repayment of the debt. A loan may be classified as substandard as a result of deterioration of the borrower’s financial condition and repayment capacity. Loans for which repayment plans have not been met or collateral equity margins do not protect the Company may also be classified as substandard.

Doubtful						Loans with the characteristics of substandard loans with the added characteristic that collection or liquidation in full, on the basis of presently existing facts and conditions, is highly improbable.

The Company’s internal creditworthiness grading system provides a measurement of credit risk based primarily on an evaluation of the borrower’s cash flow and collateral. Category ratings are reviewed each quarter, at which time management analyzes the results, as well as other external statistics and factors related to loan performance.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables represent our credit risk profile by creditworthiness:


	September 30, 2023
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,417,177	$	46,843	$	32,001	$	—	$	—	$	78,844	$	1,496,021
Time and demand	1,111,155		46,843		31,606		—		—		78,449		1,189,604
Commercial credit cards	12,934		—		—		—		—		—		12,934
Equipment finance	189,735		—		381		—		—		381		190,116
Time and demand other	103,353		—		14		—		—		14		103,367
Real estate construction	570,581		1,678		3,288		—		—		4,966		575,547
Construction other	503,909		1,678		3,288		—		—		4,966		508,875
Construction residential	66,672		—		—		—		—		—		66,672
Residential real estate	2,404,117		2,581		8,083		—		—		10,664		2,414,781
Residential first lien	1,730,461		2,581		4,161		—		—		6,742		1,737,203
Residential junior lien/home equity	673,656		—		3,922		—		—		3,922		677,578
Commercial real estate	2,951,568		75,818		22,698		—		—		98,516		3,050,084
Multifamily	537,000		461		104		—		—		565		537,565
Nonowner occupied	1,738,117		50,807		17,814		—		—		68,621		1,806,738
Owner occupied	676,451		24,550		4,780		—		—		29,330		705,781
Loans to individuals	1,365,090		—		202		—		—		202		1,365,292
Automobile and recreational vehicles	1,285,180		—		200		—		—		200		1,285,380
Consumer credit cards	9,997		—		—		—		—		—		9,997
Consumer other	69,913		—		2		—		—		2		69,915
Total loans and leases	$	8,708,533	$	126,920	$	66,272	$	—	$	—	$	193,192	$	8,901,725

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2022
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,164,193	$	35,389	$	12,124	$	—	$	—	$	47,513	$	1,211,706
Time and demand	976,346		35,389		12,089		—		—		47,478		1,023,824
Commercial credit cards	13,920		—		—		—		—		—		13,920
Equipment finance	79,674		—		—		—		—		—		79,674
Time and demand other	94,253		—		35		—		—		35		94,288
Real estate construction	513,101		—		—		—		—		—		513,101
Construction other	395,439		—		—		—		—		—		395,439
Construction residential	117,662		—		—		—		—		—		117,662
Residential real estate	2,187,780		736		6,153		—		—		6,889		2,194,669
Residential first lien	1,542,854		675		3,663		—		—		4,338		1,547,192
Residential junior lien/home equity	644,926		61		2,490		—		—		2,551		647,477
Commercial real estate	2,347,000		52,291		25,721		—		—		78,012		2,425,012
Multifamily	430,613		488		50		—		—		538		431,151
Nonowner occupied	1,439,478		49,037		21,832		—		—		70,869		1,510,347
Owner occupied	476,909		2,766		3,839		—		—		6,605		483,514
Loans to individuals	1,297,206		—		449		—		—		449		1,297,655
Automobile and recreational vehicles	1,210,090		—		361		—		—		361		1,210,451
Consumer credit cards	10,657		—		—		—		—		—		10,657
Consumer other	76,459		—		88		—		—		88		76,547
Total loans and leases	$	7,509,280	$	88,416	$	44,447	$	—	$	—	$	132,863	$	7,642,143

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by origination year:


	September 30, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Time and demand	$	140,075	$	201,945	$	123,174	$	76,068	$	52,514	$	76,227	$	519,601	$	1,189,604
Pass	137,708		193,983		112,478		71,311		40,027		69,936		485,712		1,111,155
OAEM	1,784		2,653		2,983		1,980		10,517		780		26,146		46,843
Substandard	583		5,309		7,713		2,777		1,970		5,511		7,743		31,606
Gross charge-offs	—		(6)		(6)		—		(2,363)		(1,112)		(3,937)		(7,424)
Gross recoveries	—		—		—		96		4		107		7		214
Commercial credit cards	—		—		—		—		—		—		12,934		12,934
Pass	—		—		—		—		—		—		12,934		12,934


Gross charge-offs	—		—		—		—		—		—		(63)		(63)
Gross recoveries	—		—		—		—		—		—		13		13

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	September 30, 2023
	Term Loans						Revolving Loans
	2023	2022	2021	2020	2019	Prior		Total
	(dollars in thousands)
Equipment finance	122,806	67,310	—	—	—	—	—	190,116
Pass	122,806	66,929	—	—	—	—	—	189,735

Substandard	—	381	—	—	—	—	—	381
Gross charge-offs	—	(45)	—	—	—	—	—	(45)
Gross recoveries	—	—	—	—	—	—	—	—
Time and demand other	3,214	6,482	17,867	20,272	3,219	48,542	3,771	103,367
Pass	3,214	6,482	17,867	20,272	3,219	48,528	3,771	103,353

Substandard	—	—	—	—	—	14	—	14
Gross charge-offs	—	—	—	—	—	—	(1,570)	(1,570)
Gross recoveries	—	—	—	—	—	—	125	125
Construction other	60,546	174,511	193,450	43,890	21,676	14,105	697	508,875
Pass	60,546	171,223	191,772	43,890	21,676	14,105	697	503,909
OAEM	—	—	1,678	—	—	—	—	1,678
Substandard	—	3,288	—	—	—	—	—	3,288
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Construction residential	17,883	36,866	2,290	5,596	3,559	—	478	66,672
Pass	17,883	36,866	2,290	5,596	3,559	—	478	66,672


Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	100,354	372,352	537,574	326,371	99,473	299,027	2,052	1,737,203
Pass	100,349	371,775	535,103	326,218	98,655	296,386	1,975	1,730,461
OAEM	—	—	2,059	—	124	321	77	2,581
Substandard	5	577	412	153	694	2,320	—	4,161
Gross charge-offs	—	(2)	(1)	(4)	(1)	(116)	—	(124)
Gross recoveries	—	—	—	—	—	65	—	65
Residential junior lien/home equity	49,611	72,616	46,038	2,118	2,554	5,299	499,342	677,578
Pass	49,611	72,616	46,038	2,118	2,552	5,227	495,494	673,656

Substandard	—	—	—	—	2	72	3,848	3,922
Gross charge-offs	—	—	—	—	—	—	(260)	(260)
Gross recoveries	—	—	—	—	—	—	63	63
Multifamily	5,960	156,540	141,101	97,027	32,940	101,828	2,169	537,565
Pass	5,960	156,540	141,101	97,027	32,940	101,263	2,169	537,000
OAEM	—	—	—	—	—	461	—	461
Substandard	—	—	—	—	—	104	—	104
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Nonowner occupied	142,431	418,600	170,408	163,124	232,990	670,243	8,942	1,806,738
Pass	142,431	418,118	170,408	158,484	224,009	615,790	8,877	1,738,117
OAEM	—	—	—	4,640	8,823	37,344	—	50,807
Substandard	—	482	—	—	158	17,109	65	17,814
Gross charge-offs	—	—	—	—	—	(172)	—	(172)
Gross recoveries	—	—	—	—	—	126	—	126

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	September 30, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Owner occupied	79,093		165,825		139,993		82,204		61,033		166,516		11,117		705,781
Pass	79,093		165,137		134,769		77,517		45,192		163,742		11,001		676,451
OAEM	—		688		4,133		3,683		14,253		1,760		33		24,550
Substandard	—		—		1,091		1,004		1,588		1,014		83		4,780
Gross charge-offs	—		—		—		—		—		(1,517)		—		(1,517)
Gross recoveries	—		—		—		—		—		16		—		16
Automobile and recreational vehicles	356,253		495,340		254,706		127,614		42,439		9,028		—		1,285,380
Pass	356,253		495,312		254,681		127,591		42,370		8,973		—		1,285,180

Substandard	—		28		25		23		69		55		—		200
Gross charge-offs	(153)		(1,370)		(794)		(714)		(350)		(88)		—		(3,469)
Gross recoveries	1		259		255		224		246		129		—		1,114
Consumer credit cards	—		—		—		—		—		—		9,997		9,997
Pass	—		—		—		—		—		—		9,997		9,997


Gross charge-offs	—		—		—		—		—		—		(205)		(205)
Gross recoveries	—		—		—		—		—		—		63		63
Consumer other	5,387		4,741		14,055		1,651		1,613		3,799		38,669		69,915
Pass	5,387		4,741		14,055		1,651		1,613		3,799		38,667		69,913

Substandard	—		—		—		—		—		—		2		2
Gross charge-offs	—		(24)		(49)		(30)		(136)		(17)		(719)		(975)
Gross recoveries	—		1		2		8		32		55		113		211
Total loans and leases	$	1,083,613	$	2,173,128	$	1,640,656	$	945,935	$	554,010	$	1,394,614	$	1,109,769	$	8,901,725
Total charge-offs	(153)		(1,447)		(850)		(748)		(2,850)		(3,022)		(6,754)		(15,824)
Total recoveries	1		260		257		328		282		498		384		2,010

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2022
	Term Loans												Revolving Loans
	2022		2021		2020		2019		2018		Prior				Total
	(dollars in thousands)
Time and demand	$	180,134	$	165,064	$	66,006	$	88,959	$	57,030	$	57,907	$	408,724	$	1,023,824
Pass	180,134		154,542		56,592		79,935		56,718		56,309		392,116		976,346
OAEM	—		10,489		8,387		1,846		250		895		13,522		35,389
Substandard	—		33		1,027		7,178		62		703		3,086		12,089
Commercial credit cards	—		—		—		—		—		—		13,920		13,920
Pass	—		—		—		—		—		—		13,920		13,920


Equipment finance	79,674		—		—		—		—		—		—		79,674
Pass	79,674		—		—		—		—		—		—		79,674


Time and demand other	7,172		20,281		19,626		3,823		2,885		36,197		4,304		94,288
Pass	7,172		20,281		19,626		3,823		2,885		36,162		4,304		94,253

Substandard	—		—		—		—		—		35		—		35
Construction other	81,870		179,919		85,264		23,001		24,005		1,011		369		395,439
Pass	81,870		179,919		85,264		23,001		24,005		1,011		369		395,439


Construction residential	82,829		34,783		—		31		18		—		1		117,662
Pass	82,829		34,783		—		31		18		—		1		117,662


Residential first lien	272,136		507,573		337,995		102,870		69,890		255,573		1,155		1,547,192
Pass	272,136		507,042		337,979		102,097		69,212		253,310		1,078		1,542,854
OAEM	—		164		—		133		51		250		77		675
Substandard	—		367		16		640		627		2,013		—		3,663
Residential junior lien/home equity	77,016		49,273		1,499		2,584		1,683		4,396		511,026		647,477
Pass	77,016		49,273		1,499		2,517		1,683		4,263		508,675		644,926
OAEM	—		—		—		—		—		51		10		61
Substandard	—		—		—		67		—		82		2,341		2,490
Multifamily	140,004		90,868		60,699		39,848		19,914		78,483		1,335		431,151
Pass	140,004		90,868		60,699		39,848		19,914		77,945		1,335		430,613
OAEM	—		—		—		—		—		488		—		488
Substandard	—		—		—		—		—		50		—		50
Nonowner occupied	298,751		153,918		115,947		214,068		141,814		581,060		4,789		1,510,347
Pass	298,751		153,918		115,947		212,588		113,638		541,007		3,629		1,439,478
OAEM	—		—		—		1,480		20,349		26,207		1,001		49,037
Substandard	—		—		—		—		7,827		13,846		159		21,832
Owner occupied	113,010		105,513		56,977		44,430		26,456		131,432		5,696		483,514
Pass	113,010		105,309		55,468		43,014		26,294		128,230		5,584		476,909
OAEM	—		182		745		791		92		923		33		2,766
Substandard	—		22		764		625		70		2,279		79		3,839
Automobile and recreational vehicles	613,513		330,298		172,530		68,996		20,589		4,525		—		1,210,451
Pass	613,513		330,252		172,435		68,865		20,524		4,501		—		1,210,090

Substandard	—		46		95		131		65		24		—		361
Consumer credit cards	—		—		—		—		—		—		10,657		10,657
Pass	—		—		—		—		—		—		10,657		10,657


Consumer other	6,561		17,177		2,489		3,798		1,656		4,085		40,781		76,547
Pass	6,561		17,177		2,489		3,775		1,652		4,085		40,720		76,459

Substandard	—		—		—		23		4		—		61		88
Total loans and leases	$	1,952,670	$	1,654,667	$	919,032	$	592,408	$	365,940	$	1,154,669	$	1,002,757	$	7,642,143

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Portfolio Risks

The credit quality of our loan portfolio can potentially represent significant risk to our earnings, capital and liquidity. First Commonwealth devotes substantial resources to managing this risk primarily through our credit administration department that develops and administers policies and procedures for underwriting, maintaining, monitoring and collecting loans. Credit administration is independent of lending departments and oversight is provided by the Credit Committee of the First Commonwealth Board of Directors.

Total net charge-offs for the nine months ended September 30, 2023 and 2022 were $13.8 million and $5.1 million, respectively.

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of September 30, 2023 and December 31, 2022. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.


	September 30, 2023
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	2,112	$	956	$	532	$	17,900	$	21,500	$	1,474,521	$	1,496,021
Time and demand	1,630		737		531		17,519		20,417		1,169,187		1,189,604
Commercial credit cards	97		18		—		—		115		12,819		12,934
Equipment finance	384		201		—		381		966		189,150		190,116
Time and demand other	1		—		1		—		2		103,365		103,367
Real estate construction	—		1,678		—		3,288		4,966		570,581		575,547
Construction other	—		1,678		—		3,288		4,966		503,909		508,875
Construction residential	—		—		—		—		—		66,672		66,672
Residential real estate	4,905		1,709		1,203		7,750		15,567		2,399,214		2,414,781
Residential first lien	2,665		1,306		599		3,883		8,453		1,728,750		1,737,203
Residential junior lien/home equity	2,240		403		604		3,867		7,114		670,464		677,578
Commercial real estate	2,436		294		300		18,784		21,814		3,028,270		3,050,084
Multifamily	117		—		—		68		185		537,380		537,565
Nonowner occupied	592		49		—		16,176		16,817		1,789,921		1,806,738
Owner occupied	1,727		245		300		2,540		4,812		700,969		705,781
Loans to individuals	4,260		1,607		449		202		6,518		1,358,774		1,365,292
Automobile and recreational vehicles	3,890		1,067		99		200		5,256		1,280,124		1,285,380
Consumer credit cards	37		45		—		—		82		9,915		9,997
Consumer other	333		495		350		2		1,180		68,735		69,915
Total loans and leases	$	13,713	$	6,244	$	2,484	$	47,924	$	70,365	$	8,831,360	$	8,901,725

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2022
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,233	$	279	$	355	$	2,374	$	4,241	$	1,207,465	$	1,211,706
Time and demand	1,121		270		352		2,374		4,117		1,019,707		1,023,824
Commercial credit cards	27		9		—		—		36		13,884		13,920
Equipment finance	—		—		—		—		—		79,674		79,674
Time and demand other	85		—		3		—		88		94,200		94,288
Real estate construction	502		—		—		—		502		512,599		513,101
Construction other	—		—		—		—		—		395,439		395,439
Construction residential	502		—		—		—		502		117,160		117,662
Residential real estate	3,023		1,178		811		5,683		10,695		2,183,974		2,194,669
Residential first lien	1,547		771		214		3,369		5,901		1,541,291		1,547,192
Residential junior lien/home equity	1,476		407		597		2,314		4,794		642,683		647,477
Commercial real estate	7,870		25		93		20,539		28,527		2,396,485		2,425,012
Multifamily	202		—		—		—		202		430,949		431,151
Nonowner occupied	7,547		—		92		19,575		27,214		1,483,133		1,510,347
Owner occupied	121		25		1		964		1,111		482,403		483,514
Loans to individuals	3,268		571		732		449		5,020		1,292,635		1,297,655
Automobile and recreational vehicles	2,694		368		295		361		3,718		1,206,733		1,210,451
Consumer credit cards	53		29		5		—		87		10,570		10,657
Consumer other	521		174		432		88		1,215		75,332		76,547
Total loans and leases	$	15,896	$	2,053	$	1,991	$	29,045	$	48,985	$	7,593,158	$	7,642,143

Nonaccrual Loans

The previous tables summarize nonaccrual loans by loan segment. The Company generally places loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain, when part of the principal balance has been charged off and no restructuring has occurred, or the loans reach a certain number of days past due. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.

When a loan is placed on nonaccrual, the accrued unpaid interest receivable is reversed against interest income and all future payments received are applied as a reduction to the loan principal. Generally, the loan is returned to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer in doubt.

Nonperforming Loans

Management considers loans to be nonperforming when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When management identifies a loan as nonperforming, the credit loss is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole source for repayment of the loan is the operation or liquidation of collateral. When the loan is collateral dependent, the appraised value less estimated cost to sell is utilized. If management determines that the value of the loan is less than the recorded investment in the loan, a credit loss is recognized through an allowance estimate or a charge-off to the allowance for credit losses.

When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of a

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.

At September 30, 2023 and December 31, 2022, there were no nonperforming loans held for sale. During both the nine months ended September 30, 2023 and 2022, there were no gains recognized on the sale of nonperforming loans.

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of September 30, 2023 and December 31, 2022. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position. The increase in nonperforming loans is primarily a result of $22.0 million in loans acquired from Centric, offset by the removal of $6.4 million in accruing troubled debt restructurings ("TDR's"). The TDR's were eliminated as a result of our adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). This standard was adopted on January 1, 2023 and eliminates the accounting guidance for TDR's while enhancing disclosure requirements for loan modifications for borrowers experiencing financial difficulty.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	September 30, 2023						December 31, 2022
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	2,671	$	11,142			$	3,141	$	9,555
Time and demand	2,290		10,761				3,141		9,555

Equipment finance	381		381				—		—
Time and demand other	—		—				—		—
Real estate construction	3,288		3,288				—		—
Construction other	3,288		3,288				—		—
Construction residential	—		—				—		—
Residential real estate	6,514		8,328				9,145		11,010
Residential first lien	3,883		4,970				5,754		6,848
Residential junior lien/home equity	2,631		3,358				3,391		4,162
Commercial real estate	5,114		5,847				21,505		24,119
Multifamily	68		68				—		—
Nonowner occupied	3,575		4,553				20,155		22,565
Owner occupied	1,471		1,226				1,350		1,554
Loans to individuals	202		353				528		563
Automobile and recreational vehicles	200		351				440		475

Consumer other	2		2				88		88
Subtotal	17,789		28,958				34,319		45,247
With an allowance recorded:
Commercial, financial, agricultural and other	15,229		16,562		$	11,994	1,168		1,186		$	711
Time and demand	15,229		16,562		11,994		1,168		1,186		711

Equipment finance	—		—		—		—		—		—
Time and demand other	—		—		—		—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—		—		—		—
Construction residential	—		—		—		—		—		—
Residential real estate	1,236		1,406		70		—		—		—
Residential first lien	—		—		—		—		—		—
Residential junior lien/home equity	1,236		1,406		70		—		—		—
Commercial real estate	13,670		14,459		4,162		—		—		—
Multifamily	—		—		—		—		—		—
Nonowner occupied	12,601		13,369		4,099		—		—		—
Owner occupied	1,069		1,090		63		—		—		—
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—

Consumer other	—		—		—		—		—		—
Subtotal	30,135		32,427		16,226		1,168		1,186		711
Total	$	47,924	$	61,385	$	16,226	$	35,487	$	46,433	$	711

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Nine Months Ended September 30,
	2023				2022

	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,974	$	141	$	3,762	$	88
Time and demand	3,786		141		3,762		88

Equipment finance	188		—		—		—
Time and demand other	—		—		—		—
Real estate construction	365		—		—		—
Construction other	365		—		—		—
Construction residential	—		—		—		—
Residential real estate	6,224		75		8,984		190
Residential first lien	3,602		74		5,120		139
Residential junior lien/home equity	2,622		1		3,864		51
Commercial real estate	9,253		170		16,663		89
Multifamily	30		—		230		—
Nonowner occupied	7,313		57		14,869		69
Owner occupied	1,910		113		1,564		20
Loans to individuals	428		7		435		13
Automobile and recreational vehicles	341		7		363		13

Consumer other	87		—		72		—
Subtotal	20,244		393		29,844		380
With an allowance recorded:
Commercial, financial, agricultural and other	10,190		(16)		195		—
Time and demand	10,190		(16)		195		—

Equipment finance	—		—		—		—
Time and demand other	—		—		—		—
Real estate construction	—		—		—		—
Construction other	—		—		—		—
Construction residential	—		—		—		—
Residential real estate	1,099		—		—		—
Residential first lien	—		—		—		—
Residential junior lien/home equity	1,099		—		—		—
Commercial real estate	13,134		—		6,795		—
Multifamily	—		—		—		—
Nonowner occupied	12,763		—		6,795		—
Owner occupied	371		—		—		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—

Consumer other	—		—		—		—
Subtotal	24,423		(16)		6,990		—
Total	$	44,667	$	377	$	36,834	$	380

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended September 30,
	2023				2022

	Average recorded investment		Interest income recognized			Average recorded investment		Interest Income Recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	2,509	$	135		$	3,518	$	30
Time and demand	2,269		135			3,518		30

Equipment finance	240		—			—		—
Time and demand other	—		—			—		—
Real estate construction	1,096		—			—		—
Construction other	1,096		—			—		—
Construction residential	—		—			—		—
Residential real estate	6,290		35			8,981		48
Residential first lien	3,784		34			5,200		33
Residential junior lien/home equity	2,506		1			3,781		15
Commercial real estate	7,908		213			16,124		27
Multifamily	68		—			—		—
Nonowner occupied	6,498		53			14,637		18
Owner occupied	1,342		160			1,487		9
Loans to individuals	401		6			443		5
Automobile	315		6			369		5

Consumer other	86		—			74		—
Subtotal	18,204		389			29,066		110
With an allowance recorded:
Commercial, financial, agricultural and other	14,980		—			584		—
Time and demand	14,980		—			584		—

Equipment finance	—		—			—		—
Time and demand other	—		—			—		—
Real estate construction	—		—			—		—
Construction other	—		—			—		—
Construction residential	—		—			—		—
Residential real estate	1,236		—			—		—
Residential first lien	—		—			—		—
Residential junior lien/home equity	1,236		—			—		—
Commercial real estate	13,514		—			6,336		—
Multifamily	—		—			—		—
Nonowner occupied	12,601		—			6,336		—
Owner occupied	913		—			—		—
Loans to individuals	—		—			—		—
Automobile	—		—			—		—

Consumer other	—		—			—		—
Subtotal	29,730		—			6,920		—
Total	$	47,934	$	389		$	35,986	$	110

Unfunded commitments related to nonperforming loans were $0.1 million at both September 30, 2023 and December 31, 2022. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required for these commitments at September 30, 2023 and December 31, 2022.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis. Disclosures for years prior to adoption continue to reflect TDR's as nonperforming loans and include TDR disclosures required under the previous guidance. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective loan segment and an allowance is determined by a loss given default and probability of default methodology.

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal forgiveness, other- than-insignificant payment delay, term extensions or any combination thereof.

The following tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty:


	For the Nine Months Ended September 30, 2023
	Rate Reduction		Term Extension		Principal Forgiveness		Term Extension and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)




Residential real estate	$	22	$	305	$	—	$	305	$	632	0.03	%
Residential first lien	22		305		—		305		632		0.04









Total	$	22	$	305	$	—	$	305	$	632	0.01	%



	For the Three Months Ended September 30, 2023
	Rate Reduction		Term Extension		Principal Forgiveness		Term Extension and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)




Residential real estate	$	—	$	144	$	—	$	63	$	207	0.01	%
Residential first lien	—		144		—		63		207		0.01









Total	$	—	$	144	$	—	$	63	$	207	—	%

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty:


	For the Nine Months Ended September 30, 2023
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)




Residential real estate	2.25	%	2.8	$	—	0.5
Residential first lien	2.25		2.8	—		0.5









Total	2.25	%	2.8	$	—	0.5


	For the Three Months Ended September 30, 2023
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)




Residential real estate	—	%	2.2	$	—	0.5
Residential first lien	—		2.2	—		0.5









Total	—	%	2.2	$	—	0.5

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A modification is considered to be in default when the loan is 90 days or more past due. For the nine months ended September 30, 2023, there were no modified loans that were considered to be in default. The following table shows the payment status of loans that have been modified on or after January 1, 2023, the date we adopted ASU 2022-02:


	September 30, 2023
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Total
	(dollars in thousands)








Residential real estate	$	632	$	—	$	—	$	—	$	632
Residential first lien	632		—		—		—		632









Total loans and leases	$	632	$	—	$	—	$	—	$	632

Troubled Debt Restructurings Disclosures Prior to Adoption of ASU 2022-02

Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternative financing sources. Troubled debt restructured loans are considered to be nonperforming loans.

The following tables provide detail, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:


	For the Nine Months Ended September 30, 2022
		Type of Modification
	Number of Contracts	Extend Maturity		Modify Rate		Modify Payments		Total Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve
	(dollars in thousands)




Residential real estate	2	$	—	$	10	$	59	$	69	$	68	$	—
Residential first lien	2	—		10		59		69		68		—









Total	2	$	—	$	10	$	59	$	69	$	68	$	—

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the nine months ended September 30, 2022, $10 thousand in rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. The changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.

For the three months ended September 30, 2022, there were no loans identified as troubled debt restructurings.

A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. For both the three and nine months ended September 30, 2022, there were no loans restructured within the past twelve months that were considered to be in default.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide detail related to the allowance for credit losses:


	For the Nine Months Ended September 30, 2023
	Beginning balance		Allowance for credit loss on PCD acquired loans		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	22,650	$	19,417	$	(9,102)	$	352	$	4,088	$	37,405
Time and demand	20,040		19,417		(7,424)		214		804		33,051
Commercial credit cards	335		—		(63)		13		22		307
Equipment finance	1,086		—		(45)		—		1,586		2,627
Time and demand other	1,189		—		(1,570)		125		1,676		1,420
Real estate construction	8,822		287		—		—		(605)		8,504
Construction other	6,360		227		—		—		765		7,352
Construction residential	2,462		60		—		—		(1,370)		1,152
Residential real estate	21,412		527		(384)		128		2,257		23,940
Residential first lien	14,822		197		(124)		65		2,071		17,031
Residential junior lien/home equity	6,590		330		(260)		63		186		6,909
Commercial real estate	28,804		6,971		(1,689)		142		8,871		43,099
Multifamily	4,726		234		—		—		861		5,821
Nonowner occupied	16,426		2,739		(172)		126		6,373		25,492
Owner occupied	7,652		3,998		(1,517)		16		1,637		11,786
Loans to individuals	21,218		3		(4,649)		1,388		3,429		21,389
Automobile and recreational vehicles	18,819		3		(3,469)		1,114		2,823		19,290
Consumer credit cards	412		—		(205)		63		100		370
Consumer other	1,987		—		(975)		211		506		1,729
Total loans and leases	$	102,906	$	27,205	$	(15,824)	$	2,010	$	18,040	$	134,337

a) The provision expense (credit) shown here includes the day 1 provision on non-PCD loans acquired from Centric and excludes the provision for off-balance sheet credit exposure included in the income statement.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Nine Months Ended September 30, 2022
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	18,093	$	(1,836)	$	313	$	5,902	$	22,472
Time and demand	15,283		(604)		155		5,712		20,546
Commercial credit cards	247		(209)		68		194		300
Equipment finance	—		—		—		569		569
Time and demand other	2,563		(1,023)		90		(573)		1,057
Real estate construction	4,220		—		9		2,682		6,911
Construction other	3,278		—		9		1,736		5,023
Construction residential	942		—		—		946		1,888
Residential real estate	12,625		(263)		143		6,798		19,303
Residential first lien	7,459		(124)		112		5,562		13,009
Residential junior lien/home equity	5,166		(139)		31		1,236		6,294
Commercial real estate	33,376		(1,887)		351		(3,941)		27,899
Multifamily	3,561		(411)		1		1,273		4,424
Nonowner occupied	24,838		(1,236)		340		(7,940)		16,002
Owner occupied	4,977		(240)		10		2,726		7,473
Loans to individuals	24,208		(3,113)		1,160		(2,747)		19,508
Automobile and recreational vehicles	21,392		(1,515)		699		(3,416)		17,160
Consumer credit cards	496		(415)		53		255		389
Consumer other	2,320		(1,183)		408		414		1,959
Total loans and leases	$	92,522	$	(7,099)	$	1,976	$	8,694	$	96,093

a) The provision expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended September 30, 2023
	Beginning balance		Allowance for credit loss on PCD acquired loans		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	41,714	$	—	$	(1,762)	$	98	$	(2,645)	$	37,405
Time and demand	37,873		—		(954)		46		(3,914)		33,051

Commercial credit cards	320		—		(28)		6		9		307
Equipment finance	2,074		—		—		—		553		2,627
Time and demand other	1,447		—		(780)		46		707		1,420
Real estate construction	7,728		—		—		—		776		8,504
Construction other	6,145		—		—		—		1,207		7,352
Construction residential	1,583		—		—		—		(431)		1,152
Residential real estate	23,740		—		(304)		57		447		23,940
Residential first lien	16,563		—		(107)		22		553		17,031
Residential junior lien/home equity	7,177		—		(197)		35		(106)		6,909
Commercial real estate	38,927		—		(172)		6		4,338		43,099
Multifamily	5,775		—		—		—		46		5,821
Nonowner occupied	21,710		—		(172)		2		3,952		25,492
Owner occupied	11,442		—		—		4		340		11,786
Loans to individuals	21,437		—		(2,360)		461		1,851		21,389
Automobile and recreational vehicles	19,258		—		(1,883)		412		1,503		19,290
Consumer credit cards	375		—		(59)		16		38		370
Consumer other	1,804		—		(418)		33		310		1,729
Total loans and leases	$	133,546	$	—	$	(4,598)	$	622	$	4,767	$	134,337

a) The provision expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended September 30, 2022
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	21,989	$	(852)	$	154	$	1,181	$	22,472
Time and demand	19,921		(321)		77		869		20,546
Commercial credit cards	387		(132)		42		3		300
Equipment finance	272		—		—		297		569
Time and demand other	1,409		(399)		35		12		1,057
Real estate construction	5,529		—		9		1,373		6,911
Construction other	3,600		—		9		1,414		5,023
Construction residential	1,929		—		—		(41)		1,888
Residential real estate	17,747		(119)		83		1,592		19,303
Residential first lien	11,860		(79)		67		1,161		13,009
Residential junior lien/home equity	5,887		(40)		16		431		6,294
Commercial real estate	31,387		(1,335)		332		(2,485)		27,899
Multifamily	3,555		—		1		868		4,424
Nonowner occupied	20,953		(1,095)		330		(4,186)		16,002
Owner occupied	6,879		(240)		1		833		7,473
Loans to individuals	16,951		(1,064)		331		3,290		19,508
Automobile and recreational vehicles	14,563		(538)		156		2,979		17,160
Consumer credit cards	312		(182)		15		244		389
Consumer other	2,076		(344)		160		67		1,959
Total loans and leases	$	93,603	$	(3,370)	$	909	$	4,951	$	96,093

a) The provision expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

Note 9 Leases

First Commonwealth has elected to apply certain practical expedients provided under ASU 2016-02 "Leases" (Topic 842) including (i) to not apply the requirements in the new standard to short-term leases; (ii) to not reassess the lease classification for any expired or existing lease; (iii) to account for lease and non-lease components separately; and (iv) to not reassess initial direct costs for any existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, including certain branch and ATM locations and office space. First Commonwealth has no material leasing arrangements for which it is the lessor of property or equipment.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table represents the unaudited Consolidated Statements of Condition classification of the Company’s right of use ("ROU") assets and lease liabilities, lease costs and other lease information.


					September 30, 2023			December 31, 2022
Balance sheet:
Operating lease asset classified as premises and equipment					$	45,783		$	40,747
Operating lease liability classified as other liabilities					50,155			45,149

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023			September 30, 2022
Income statement:
Operating lease cost classified as occupancy and equipment expense	$	1,521	$	1,259	$	4,565		$	3,727

Weighted average lease term, in years					13.37			14.10
Weighted average discount rate					3.51		%	3.28		%
Operating cash flows					$	1,571		$	1,245

In the above table, the increase in the ROU asset and lease liability at September 30, 2023 compared to December 31, 2022, is primarily a result of leases assumed as part of the Centric acquisition.

The ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. First Commonwealth's lease agreements often include one or more options to renew at the Company's discretion. If we consider the renewal option to be reasonably certain, we include the extended term in the calculation of the ROU asset and lease liability.

First Commonwealth uses incremental borrowing rates when calculating the lease liability because the rate implicit in the lease is not readily determinable. The incremental borrowing rate used by First Commonwealth is an amortizing loan rate obtained from the Federal Home Loan Bank ("FHLB") of Pittsburgh. This rate is consistent with a collateralized borrowing rate and is available for terms similar to the lease payment schedules.

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2023 were as follows (dollars in thousands):


For the twelve months ended:
September 30, 2024	$	5,847
September 30, 2025	5,621
September 30, 2026	5,160
September 30, 2027	4,909
September 30, 2028	4,672
Thereafter	37,922
Total future minimum lease payments	64,131
Less remaining imputed interest	13,976
Operating lease liability	$	50,155

Note 10 Income Taxes

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at September 30, 2023 and December 31, 2022, First Commonwealth had no material unrecognized tax benefits or accrued interest and penalties. If applicable, First Commonwealth will record interest and penalties as a component of noninterest expense.

First Commonwealth is subject to routine audits of our tax returns by the Internal Revenue Service (“IRS”) as well as all states in which we conduct business. Generally, tax years prior to the year ended December 31, 2019 are no longer open to examination by federal and state taxing authorities.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11 Fair Values of Assets and Liabilities

FASB ASC Topic 820, “Fair Value Measurements and Disclosures” ("Topic 820"), requires disclosures for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). All non-financial assets are included either as a separate line item on the unaudited Consolidated Statements of Financial Condition or in the “Other assets” category of the unaudited Consolidated Statements of Financial Condition. Currently, First Commonwealth does not have any non-financial liabilities to disclose.

FASB ASC Topic 825, “Financial Instruments” ("Topic 825"), permits entities to irrevocably elect to measure select financial instruments and certain other items at fair value. The unrealized gains and losses are required to be included in earnings each reporting period for the items that fair value measurement is elected. First Commonwealth has elected not to measure any existing financial instruments at fair value under Topic 825; however, in the future we may elect to adopt this guidance for select financial instruments.

In accordance with Topic 820, First Commonwealth groups financial assets and financial liabilities measured at fair value in three levels based on the principal markets in which the assets and liabilities are transacted and the observability of the data points used to determine fair value. These levels are:

•Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange (“NYSE”). Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

•Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained for observable inputs for identical or comparable assets or liabilities from alternative pricing sources with reasonable levels of price transparency. Level 2 includes Obligations of U.S. Government securities issued by Agencies and Sponsored Enterprises, Obligations of States and Political Subdivisions, corporate securities, FHLB stock, loans held for sale, premise held for sale, interest rate derivatives (including interest rate caps, interest rate collars, interest rate swaps and risk participation agreements), certain other real estate owned and certain nonperforming loans.

Level 2 investment securities are valued by a recognized third party pricing service using observable inputs. The model used by the pricing service varies by asset class and incorporates available market, trade and bid information as well as cash flow information when applicable. Because many fixed-income investment securities do not trade on a daily basis, the model uses available information such as benchmark yield curves, benchmarking of like investment securities, sector groupings and matrix pricing. The model will also use processes such as an option-adjusted spread to assess the impact of interest rates and to develop prepayment estimates. Market inputs normally used in the pricing model include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.

Management validates the market values provided by the third party service by having another source price 100% of the securities on a monthly basis, monthly monitoring of variances from prior period pricing and, on a monthly basis, evaluating pricing changes compared to expectations based on changes in the financial markets.

Other investments recorded in the unaudited Consolidated Statements of Financial Condition are primarily comprised of FHLB stock whose estimated fair value is based on its par value. Additional information on FHLB stock is provided in Note 7, “Investment Securities.”

Loans held for sale include residential mortgage loans originated for sale in the secondary mortgage market. The estimated fair value for these loans was determined on the basis of rates obtained in the respective secondary market. Loans held for sale could also include the Small Business Administration guaranteed portion of small business loans. The estimated fair value of these loans is based on the contract with the third party investor. When loans held for sale include other commercial loans, fair value is determined using an executed trade or market bid obtained from potential buyers.

Interest rate derivatives are reported at an estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities, and consist of interest rate swaps where there is no significant deterioration in the counterparties' and/or loan customers' credit risk since origination of the interest rate swap as well as interest rate caps, interest rate collars and risk participation agreements. First Commonwealth values its interest rate swap and cap positions using a yield curve by taking market prices/rates for an appropriate set of instruments. The set of instruments used to determine the U.S. Dollar yield curve includes Secured Overnight Financing Rate ("SOFR") rates from overnight to one year, Eurodollar futures contracts and SOFR

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

swap rates from one year to thirty years. These yield curves determine the valuations of interest rate swaps. Interest rate derivatives are further described in Note 12, “Derivatives.”

For purposes of potential valuation adjustments to our derivative positions, First Commonwealth evaluates the credit risk of its counterparties as well as our own credit risk. Accordingly, we have considered factors such as the likelihood of default, expected loss given default, net exposures and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. We review our counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure.

Interest rate derivatives also include interest rate forwards entered into to hedge residential mortgage loans held for sale and the related interest-rate lock commitments. This includes forward commitments to sell mortgage loans. The fair value of these derivative financial instruments are based on derivative market data inputs as of the valuation date and the underlying value of mortgage loans for rate lock commitments.

In addition, at times the Company hedges foreign currency risk through the use of foreign exchange forward contracts. The fair value of foreign exchange forward contracts is based on the differential between the contract price and the market-based forward rate.

The estimated fair value for other real estate owned included in Level 2 is determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement.

•Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker traded transactions. If the inputs used to provide the valuation are unobservable and/or there is very little, if any, market activity for the security or similar securities, the securities would be considered Level 3 securities. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The assets included in Level 3 are non-marketable equity investments, certain interest rate derivatives and certain nonperforming loans.

The estimated fair value of other investments included in Level 3 is based on carrying value as these securities do not have a readily determinable fair value.

The estimated fair value of limited partnership investments included in Level 3 is based on par value.

For interest rate derivatives included in Level 3, the fair value incorporates credit risk by considering such factors as likelihood of default and expected loss given default based on the credit quality of the underlying counterparties (loan customers).

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with ASU No. 2011-04, the following table provides information related to quantitative inputs and assumptions used in Level 3 fair value measurements.

Fair Value (dollars
in thousands)

Valuation
Technique

Unobservable Inputs

Range /
(weighted average)

September 30, 2023

Other Investments

6,182

Carrying Value

N/A

Nonperforming Loans

253

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$3.00 - $3.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

Limited Partnership Investments

26,397

Par Value

N/A

December 31, 2022

Other Investments

1,170

Carrying Value

N/A

Nonperforming Loans

363

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$3.00 - $3.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

Limited Partnership Investments

17,691

Par Value

N/A

(a)The remainder of nonperforming loans valued using Level 3 inputs are not included in this disclosure as the values of those loans are based on bankruptcy agreement documentation.

(b)Unobservable inputs are defined as follows: MMBTU - one million British thermal units; BBL/d - barrels per day.

The discount rate is the significant unobservable input used in the fair value measurement of nonperforming loans. Significant increases in this rate would result in a decrease in the estimated fair value of the loans, while a decrease in this rate would result in a higher fair value measurement. Other unobservable inputs in the fair value measurement of nonperforming loans relate to gas, oil and natural gas prices. Increases in these prices would result in an increase in the estimated fair value of the loans, while a decrease in these prices would result in a lower fair value measurement.

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis:


	September 30, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,426	$	—	$	3,426
Mortgage-Backed Securities - Commercial	—		364,811		—		364,811
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		411,258		—		411,258

Other Government-Sponsored Enterprises	—		887		—		887
Obligations of States and Political Subdivisions	—		7,753		—		7,753
Corporate Securities	—		29,468		—		29,468



Total Securities Available for Sale	—		817,603		—		817,603
Other Investments	—		42,797		6,182		48,979
Loans Held for Sale	—		33,127		—		33,127

Other Assets(a)	—		65,834		26,397		92,231
Total Assets	$	—	$	959,361	$	32,579	$	991,940
Other Liabilities(a)	$	—	$	99,441	$	—	$	99,441
Total Liabilities	$	—	$	99,441	$	—	$	99,441

(a)Hedging and non-hedging interest rate derivatives and limited partnership investments

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,983	$	—	$	3,983
Mortgage-Backed Securities - Commercial	—		271,416		—		271,416
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		448,989		—		448,989

Other Government-Sponsored Enterprises	—		882		—		882
Obligations of States and Political Subdivisions	—		8,187		—		8,187
Corporate Securities	—		29,204		—		29,204



Total Securities Available for Sale	—		762,661		—		762,661
Other Investments	—		25,244		1,170		26,414
Loans Held for Sale	—		11,869		—		11,869

Other Assets(a)	—		50,738		17,691		68,429
Total Assets	$	—	$	850,512	$	18,861	$	869,373
Other Liabilities(a)	$	—	$	89,298	$	—	$	89,298
Total Liabilities	$	—	$	89,298	$	—	$	89,298

(a)Hedging and non-hedging interest rate derivatives and limited partnership investments

For the nine months ended September 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	2023
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	1,170	$	17,691	$	18,861
Total gains or losses
Included in earnings	—		—		—
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	5,000		9,161		14,161
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(512)		(512)
Transfers from Level 3	—		—		—
Transfers into Level 3	12		57		69
Balance, end of period	$	6,182	$	26,397	$	32,579

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	2022
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	1,170	$	14,981	$	16,151
Total gains or losses
Included in earnings	—		—		—
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		1,809		1,809
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(192)		(192)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	1,170	$	16,598	$	17,768

During the nine months ended September 30, 2023 and 2022, there were no transfers between fair value Levels 1, 2 or 3; however, $12 thousand in other investments and $57 thousand in other assets were transferred into Level 3 for the nine months ended September 30, 2023 as a result of assets acquired in the Centric acquisition. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2023 and 2022.

For the three months ended September 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	2023
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	6,182	$	25,011	$	31,193
Total gains or losses
Included in earnings	—		—		—
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		1,544		1,544
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(158)		(158)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	6,182	$	26,397	$	32,579

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	2022
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	1,170	$	16,613	$	17,783
Total gains or losses
Included in earnings	—		—		—
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		26		26
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(41)		(41)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	1,170	$	16,598	$	17,768

During the three months ended September 30, 2023 and 2022, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2023 and 2022.

The tables below present the balances of assets measured at fair value on a nonrecurring basis at the dates shown below:


	September 30, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Nonperforming loans	$	—	$	21,934	$	9,764	$	31,698
Other real estate owned	—		834		—		834
Total Assets	$	—	$	22,768	$	9,764	$	32,532


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Nonperforming loans	$	—	$	23,140	$	11,636	$	34,776
Other real estate owned	—		553		—		553
Total Assets	$	—	$	23,693	$	11,636	$	35,329

The following losses were realized on the assets measured on a nonrecurring basis:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Nonperforming loans	$	(4,598)	$	(2,200)	$	(5,265)	$	(2,653)
Other real estate owned	—		—		—		—
Total losses	$	(4,598)	$	(2,200)	$	(5,265)	$	(2,653)

Nonperforming loans over $250 thousand are individually reviewed to determine the amount of each loan considered to be at risk of non-collection. The fair value for nonperforming loans that are collateral-based is determined by reviewing real property appraisals, equipment valuations, accounts receivable listings and other financial information. A discounted cash flow analysis

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is performed to determine fair value for nonperforming loans when an observable market price or a current appraisal is not available. For real estate secured loans, First Commonwealth’s loan policy requires updated appraisals be obtained at least every twelve months on all nonperforming loans with balances of $250 thousand and over. For real estate secured loans with balances under $250 thousand, we rely on broker price opinions. For non-real estate secured assets, the Company normally relies on third party valuations specific to the collateral type.

The fair value for other real estate owned, determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement, is classified as Level 2. The fair value for other real estate owned, determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of $0.8 million as of September 30, 2023 and consists of seven residential real estate properties in Pennsylvania and Ohio. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.

Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 13, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2023.

FASB ASC Topic 825-10, “Transition Related to FSP FAS 107-1” and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are as discussed above. The methodologies for other financial assets and financial liabilities are discussed below.

Cash and due from banks and interest-bearing bank deposits: The carrying amounts for cash and due from banks and interest-bearing bank deposits approximate the estimated fair values of such assets.

Securities: Fair values for securities available for sale and held to maturity are based on quoted market prices, if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of other investments, which includes FHLB stock and other equity investments, is considered a reasonable estimate of fair value.

Loans: The fair values of all loans are estimated by discounting the estimated future cash flows using interest rates currently offered for loans with similar terms to borrowers of similar credit quality adjusted for past due and nonperforming loans.

Loans held for sale: The estimated fair value of loans held for sale is based on market bids obtained from potential buyers.

Off-balance sheet instruments: Many of First Commonwealth’s off-balance sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. FASB ASC Topic 460, “Guarantees” clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The carrying amount and estimated fair value for standby letters of credit was $0.1 million at both September 30, 2023 and December 31, 2022. See Note 6, “Commitments and Contingent Liabilities,” for additional information.

Deposit liabilities: The estimated fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date because of the customers’ ability to withdraw funds immediately. The fair value of fixed rate time deposits are estimated by discounting the future cash flows using interest rates currently being offered and a schedule of aggregated expected maturities.

Short-term borrowings: The fair values of borrowings from the FHLB were estimated based on the estimated incremental borrowing rate for similar type borrowings. The carrying amounts of other short-term borrowings, such as federal funds purchased and securities sold under agreement to repurchase, were used to approximate fair value due to the short-term nature of the borrowings.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subordinated debt and long-term debt: The fair value is estimated by discounting the future cash flows using First Commonwealth’s estimate of the current market rate for similar types of borrowing arrangements.

The following table presents carrying amounts and fair values of First Commonwealth’s financial instruments:


	September 30, 2023
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	122,982	$	122,982	$	122,982	$	—	$	—
Interest-bearing deposits	214,088		214,088		214,088		—		—
Securities available for sale	817,603		817,603		—		817,603		—
Securities held to maturity	429,558		341,646		—		341,646		—
Other investments	48,979		48,979		—		42,797		6,182
Loans held for sale	33,127		33,127		—		33,127		—
Loans and leases	8,901,725		8,683,023		—		21,934		8,661,089
Financial liabilities
Deposits	9,241,065		9,227,226		—		9,227,226		—
Short-term borrowings	544,060		539,688		—		539,688		—
Subordinated debt	177,679		149,252		—		—		149,252
Long-term debt	4,310		4,142		—		4,142		—
Capital lease obligation	5,028		5,028		—		5,028		—


	December 31, 2022
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	124,254	$	124,254	$	124,254	$	—	$	—
Interest-bearing deposits	29,990		29,990		29,990		—		—
Securities available for sale	762,661		762,661		—		762,661		—
Securities held to maturity	461,162		386,205		—		386,205		—
Other investments	26,414		26,414		—		25,244		1,170
Loans held for sale	11,869		11,869		—		11,869		—
Loans and leases	7,642,143		7,639,721		—		23,140		7,616,581
Financial liabilities
Deposits	8,005,469		7,992,012		—		7,992,012		—
Short-term borrowings	372,694		363,135		—		363,135		—
Subordinated debt	170,937		156,621		—		—		156,621
Long-term debt	4,862		4,781		—		4,781		—
Capital lease obligation	5,425		5,425		—		5,425		—

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 Derivatives

Derivatives Not Designated as Hedging Instruments

First Commonwealth is a party to interest rate derivatives that are not designated as hedging instruments. These derivatives relate to interest rate swaps that First Commonwealth enters into with customers to allow customers to convert variable rate loans to a fixed rate. First Commonwealth pays interest to the customer at a floating rate on the notional amount and receives interest from the customer at a fixed rate for the same notional amount. At the same time the interest rate swap is entered into with the customer, an offsetting interest rate swap is entered into with another financial institution. First Commonwealth pays the other financial institution interest at the same fixed rate on the same notional amount as the swap entered into with the customer, and receives interest from the financial institution for the same floating rate on the same notional amount.

The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties.

We have 27 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. We have 16 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are the lead bank. The risk participation agreement provides credit protection to us should the borrower fail to perform on its interest rate derivative contract with us.

First Commonwealth is also party to interest rate caps and collars that are not designated as hedging instruments. The interest rate caps relate to contracts that First Commonwealth enters into with loan customers that provide a maximum interest rate on their variable rate loan. At the same time the interest rate cap is entered into with the customer, First Commonwealth enters into an offsetting interest rate cap with another financial institution. The notional amount and maximum interest rate on both interest cap contracts are identical. The interest rate collars relate to contracts that First Commonwealth enters into with loan customers that provides both a maximum and minimum interest rate on their variable rate loan. At the same time the interest rate collar is entered into with the customer, First Commonwealth enters into an offsetting interest rate collar with another financial institution. The notional amount and the maximum and minimum interest rates on both interest collar contracts are identical.

The fee received, less the estimate of the loss for the credit exposure, was recognized in earnings at the time of the transaction.

Derivatives Designated as Hedging Instruments

In August 2019, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts mature on August 15, 2024 and August 15, 2026 and have notional amounts of $30.0 million and $40.0 million, respectively. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments made on subordinated debentures. Initially these swaps were benchmarked to the 3-month LIBOR rate; however, as a result of the discontinuance of the LIBOR rate on June 30, 2023, both of the swap contracts were amended to hedge exposure to the variability of the 3-month CME Term SOFR. This change is in agreement with amendments made to the interest rate on the subordinated debentures as a result of the discontinuance of LIBOR. Therefore, the interest rate swaps convert the interest rate benchmark on the first $70.0 million of 3-month SOFR based subordinated debentures to a fixed rate.

During 2021, the Company entered into eight interest rate swap contracts that were designated as cash flow hedges. The interest rate swaps have a total notional amount of $500.0 million: $75.0 million with an original maturity of three years, $250.0 million with an original maturity of four years and $175.0 million with an original maturity of five years. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments on commercial loans. Initially these swaps were benchmarked to the 1-month LIBOR rate, however as a result of the discontinuance of the LIBOR rate on June 30, 2023, these swaps were amended to hedge exposure to the variability of the 1-month CME SOFR rate. Therefore, the interest rate swaps convert the interest payments on the first $500.0 million of 1-month CME SOFR based commercial loans into fixed rate payments.

The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income. For the three and nine months ended September 30, 2023, there was a negative impact of $4.8 million and $13.8 million, respectively, on net interest income as a result of these interest rate swaps. Changes in the fair value of the cash flow hedges are reported on the balance sheet and in

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in "Interest on subordinated debentures," or "Interest and fees on loans", the same line items in the unaudited Consolidated Statements of Income as the income on the hedged items. The cash flow hedges were highly effective at September 30, 2023, and changes in the fair value attributed to hedge ineffectiveness were not material.

The Company also enters into interest rate lock commitments in conjunction with its mortgage origination business. These are commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Company locks in the rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Loans under mandatory rate lock commitments are covered under forward sales contracts of mortgage-backed securities (“MBS”). Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in "Noninterest income" in the unaudited Consolidated Statements of Income. The impact to noninterest income for the three and nine months ended September 30, 2023 was an decrease of $0.6 million and $0.2 million, respectively.

Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. We determine the fair value of rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates and taking into consideration the probability that the rate lock commitments will close or will be funded. At September 30, 2023, the underlying funded mortgage loan commitments had a carrying value of $6.0 million and a fair value of $5.6 million, while the underlying unfunded mortgage loan commitments had a notional amount of $51.4 million. At December 31, 2022, the underlying funded mortgage loan commitments had a carrying value of $4.3 million and a fair value of $4.0 million, while the underlying unfunded mortgage loan commitments had a notional amount of $12.0 million. The interest rate lock commitments decreased other noninterest income by $0.5 million and $0.6 million, respectively, for the three and nine months ended September 30, 2023.

In addition, based on customer activity, a small amount of interest income on loans may be exposed to changes in foreign exchange rates. Several commercial borrowers have a portion of their operations outside of the United States and from time to time borrow funds on a short-term basis to fund those operations. In order to reduce the risk related to the translation of foreign denominated transactions into U.S. dollars, the Company may enter into foreign exchange forward contracts. These contracts relate principally to the Euro and the Canadian dollar. The contracts are recorded at fair value with changes in fair value recorded in "Other operating expense" in the unaudited Consolidated Statements of Income. At September 30, 2023 and December 31, 2022, there were no foreign exchange contracts outstanding and there was no impact to other noninterest expense for the three and nine months ended September 30, 2023.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table depicts the credit value and fair value adjustments recorded related to the notional amount of derivatives outstanding as well as the notional amount of risk participation agreements participated to other banks:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Derivatives not Designated as Hedging Instruments
Credit value adjustment	$	—	$	(27)
Notional amount:
Interest rate derivatives	860,545		816,745
Interest rate caps	37,746		15,340
Interest rate collars	35,354		35,354
Risk participation agreements	199,341		256,043
Sold credit protection on risk participation agreements	(101,321)		(100,741)
Interest rate options	51,384		12,009
Derivatives Designated as Hedging Instruments
Interest rate swaps:
Fair value adjustment	(34,260)		(38,596)
Notional amount	570,000		570,000
Interest rate forwards:
Fair value adjustment	653		63
Notional amount	52,000		16,000
Foreign exchange forwards:
Fair value adjustment	—		—
Notional amount	—		—

The table below presents the change in the fair value of derivative assets and derivative liabilities attributable to credit risk or fair value changes included in "Other income", "Other expense," "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Non-hedging interest rate derivatives
Decrease in other income	$	(581)	$	(149)	$	(178)	$	(1,253)

Hedging interest rate derivatives
Decrease in interest and fees on loans	(5,508)		(1,975)		(15,678)		(1,288)
(Decrease) increase in interest from subordinated debentures	(715)		(159)		(1,925)		159

Hedging interest rate forwards
Decrease in other income	(460)		(764)		(590)		(1,036)

Hedging foreign exchange forwards
Increase in other expense	—		7		—		5

The fair value of our derivatives is included in a table in Note 11, “Fair Values of Assets and Liabilities,” in the line items “Other assets” and “Other liabilities.”

Note 13 Goodwill

FASB ASC Topic 350-20, “Intangibles – Goodwill and Other” requires an annual valuation of the fair value of a reporting unit that has goodwill and a comparison of the fair value to the book value of equity to determine whether the goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that it is more likely

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.

We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill at September 30, 2023 and December 31, 2022 was $363.7 million and $303.3 million, respectively. The $60.4 million increase in goodwill during the nine months ended September 30, 2023 is the result of the Centric acquisition. No impairment charges on goodwill or other intangible assets were incurred in 2023 or 2022.

We test goodwill for impairment as of November 30th each year and again at any quarter-end if any material events occur during a quarter that may affect goodwill.

As of September 30, 2023, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

Note 14 Subordinated Debentures

Subordinated debentures outstanding are as follows:


			September 30, 2023		December 31, 2022
	Due	Rate	Amount			Amount
			(dollars in thousands)
Owed to:

First Commonwealth Bank	2028	3-Month CME Term SOFR + 0.26161% + 1.845%	$	49,569		$	49,499
First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month CME Term SOFR + 0.26161% + 2.37%	49,323			49,271
First Commonwealth Financial Corp	2031	4.50% until March 29, 2026, then Prime + 1.00%	6,620			—
First Commonwealth Capital Trust II	2034	3-Month CME Term SOFR + 0.26161% + 2.85%	30,929			30,929
First Commonwealth Capital Trust III	2034	3-Month CME Term SOFR + 0.26161% + 2.85%	41,238			41,238
Total			$	177,679		$	170,937

With the acquisition of Centric, First Commonwealth acquired a ten-year subordinated note with a principal balance of $6.0 million. The rate remains fixed at 4.50% until March 29, 2026, then adjusts quarterly to Prime + 1.00%. The Bank may redeem the notes, beginning with the interest payment due on March 29, 2026, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. A fair value premium of $0.6 million was recognized in connection with the acquisition.

On May 21, 2018, First Commonwealth issued ten-year subordinated notes with an aggregate principal amount of $50.0 million. Interest is paid quarterly at a rate of three-month CME Term SOFR + 0.26161% + 1.845%. The Company may redeem the notes, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. Deferred issuance costs of $0.9 million are being amortized on a straight-line basis over the term of the notes.

On May 21, 2018, First Commonwealth issued fifteen-year subordinated notes with an aggregate principal amount of $50.0 million and a fixed-to-floating rate of 5.50%. The rate remains fixed until June 1, 2028, then adjusts on a quarterly basis to three-month CME Term SOFR+ 0.26161% + 2.37%. The Bank may redeem the notes, subject to regulatory approval, beginning with the interest payment due on June 1, 2028, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. Deferred issuance costs of $1.1 million are being amortized on a straight-line basis over the term of the notes.

First Commonwealth currently has two trusts, First Commonwealth Capital Trust II and First Commonwealth Capital Trust III, of which 100% of the common equity is owned by First Commonwealth. The trusts were formed for the purpose of issuing company obligated mandatorily redeemable capital securities to third-party investors and investing the proceeds from the sale of the capital securities solely in junior subordinated debt securities (“subordinated debentures”) of First Commonwealth. The subordinated debentures held by each trust are the sole assets of the trust.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest on the debentures issued to First Commonwealth Capital Trust III is paid quarterly at a floating rate of three-month CME Term SOFR + 0.26161% + 2.85%, which is reset quarterly. Subject to regulatory approval, First Commonwealth may redeem the debentures, in whole or in part, at its option on any interest payment date at a redemption price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest to the date of the redemption. Deferred issuance costs of $0.6 million are being amortized on a straight-line basis over the term of the securities.

Interest on the debentures issued to First Commonwealth Capital Trust II is paid quarterly at a floating rate of three-month CME Term SOFR + 0.26161% + 2.85%, which is reset quarterly. Subject to regulatory approval, First Commonwealth may redeem the debentures, in whole or in part, at its option at a redemption price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest to the date of the redemption. Deferred issuance costs of $0.5 million are being amortized on a straight-line basis over the term of the securities.

In order to reduce its exposure to variability in expected future cash flows related to interest payments on First Commonwealth Capital Trust II and III, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts fix the index rate based portion of the interest rate on Capital Trust II at 1.515% until August 15, 2024 and on Capital Trust III at 1.525% until August 15, 2026. Additional information related to these cash flow hedges can be found in Note 12 - "Derivatives".

Note 15 Revenue Recognition

Substantially all of the Company’s revenue is generated from contracts with customers. Revenue associated with financial instruments, including revenue from loans and securities, certain noninterest income streams such as fees associated with derivatives are not in scope of FASB ASC Topic 606 - "Revenue from Contracts with Customers" ("Topic 606"). Topic 606 is applicable to noninterest revenue streams such as trust income, service charges on deposits, insurance and retail brokerage commissions, card-related interchange income and gain(loss) on sale of OREO. For contracts within the scope of Topic 606, the Company immediately expenses contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.

Noninterest revenue streams in-scope of Topic 606 are discussed below:

Trust Income

Trust income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon a tiered scale of market value of the assets under management at month-end. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as financial planning or tax return preparation services are also available to trust customers. The Company’s performance obligation for these transactional-based services is generally satisfied and related revenue recognized at a point in time. Payment is received shortly after services are rendered.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of fees earned from its deposit customers for transaction-based, account maintenance, overdraft services and account analysis fees. Transaction-based fees, which include services such as ATM use fees, stop payment fees, statement rendering and ACH fees are recognized at the time the transaction is executed which is the point in time the Company fulfills the customer’s request. Monthly account maintenance fees are earned over the course of the month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. The Company’s performance obligation for account analysis fees is generally satisfied, and the related revenue recognized, during the month the service is provided. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Insurance and Retail Brokerage Commissions

Insurance income primarily consists of commissions received from execution of personal, business and health insurance policies when acting as an agent on behalf of insurance carriers. The Company’s performance obligation is generally satisfied upon the issuance of the insurance policy. Because the Company’s contracts with the insurance carriers are generally cancellable by either party, with minimal notice, insurance commissions are recognized during the policy period as received. Also, the majority of insurance commissions are received on a monthly basis during the policy period; however, some carriers pay the full annual commission to First Commonwealth at the time of policy issuance or renewal. In these cases, First Commonwealth would be required to refund any commissions it would not be entitled to as a result of cancelled or terminated policies. The Company has established a refund liability for the remaining term of the policies expected to be cancelled. The Company also receives incentive-based contingency fees from the insurance carriers. Contingency fee revenue, which totals approximately $0.3 million per year, is recognized as received due to the immaterial amount.

Retail brokerage income primarily consists of commissions received on annuity and investment product sales through a third-party service provider. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy or the execution of an investment transaction. The Company does not earn a significant amount of trailer fees on annuity sales. However, after considering the factors impacting these trailer fees, such as the uncertainty of investor behavior and changes in the market value of assets, First Commonwealth determined that it would recognize trailing fees as received because it could not reasonably estimate an amount of future trailing commissions for which collection is probable. Commissions from the third-party service provider are received on a monthly basis based upon customer activity for the month. The fees are recognized monthly with a receivable until commissions are received from the third-party service provider the following month. Because the Company acts as an agent in arranging the relationship between the customer and the third-party service provider and does not control the services rendered to the customers, retail brokerage fees are presented net of related costs, including $3.1 million and $2.9 million in commission expense as of September 30, 2023 and 2022, respectively.

Card-Related Interchange Income

Card-related interchange income is primarily comprised of debit and credit card income, ATM fees and merchant services income. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Card-related interchange income is recognized daily as the customer transactions are settled.

Other Income

Other income includes service revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for these services are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Gains(losses) on sales of OREO

First Commonwealth records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When First Commonwealth finances the sale of OREO to the buyer, an assessment of whether the buyer is committed to perform their obligations under the contract is completed along with an evaluation of whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, First Commonwealth adjusts the transaction price and the related gain or loss on sale if a significant financing component is present.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income	$	2,949	$	2,777	$	7,967	$	8,063
Service charges on deposit accounts	5,600		5,194		15,842		14,695
Insurance and retail brokerage commissions	2,305		2,048		7,171		6,806
Card-related interchange income	7,221		6,980		21,422		20,607
Gain on sale of other loans and assets	102		40		268		393
Other income	1,097		991		3,233		3,064
Noninterest Income (in-scope of Topic 606)	19,274		18,030		55,903		53,628
Noninterest Income (out-of-scope of Topic 606)	5,552		7,884		16,409		20,771
Total Noninterest Income	$	24,826	$	25,914	$	72,312	$	74,399

Table of Contents

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three and nine months ended September 30, 2023 and 2022, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of First Commonwealth or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may,” are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

•Local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.

•Volatility and disruption in national and international financial markets.

•Government intervention in the U.S. financial system.

•Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.

•Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.

•Inflation, interest rate, securities market and monetary fluctuations.

•Unexpected outflows of uninsured deposits.

•The effect of changes in laws and regulations, including with respect to capital, and liquidity requirements, which may become more stringent in light of recent market events, may adversely affect our financial condition or results of operations.

•Factors that can impact the performance of our loan portfolio, including changes in real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions.

•The soundness of other financial institutions.

•Political instability.

•Impairment of our goodwill or other intangible assets.

•Acts of God or of war or terrorism.

•The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

•Changes in consumer spending, borrowings and savings habits.

•Changes in the financial performance and/or condition of our borrowers.

•Technological changes.

•The cost and effects of cyber incidents or other failures, interruption or security breaches of our systems or those of third-party providers.

•Acquisitions and integration of acquired businesses.

•Our ability to increase market share and control expenses.

•Our ability to attract and retain qualified employees.

•Changes in the competitive environment in our markets and among banking organizations and other financial service providers.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

•The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

•Changes in the reliability of our vendors, internal control systems or information systems.

•Changes in our liquidity position.

•Changes in our organization, compensation and benefit plans.

•The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.

•Greater than expected costs or difficulties related to the integration of new products and lines of business.

•Our success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Explanation of Use of Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles (“GAAP”), First Commonwealth management uses, and this quarterly report contains or references, certain non-GAAP financial measures, such as net interest income on a fully taxable equivalent basis. We believe these non-GAAP financial measures provide information that is useful to investors in understanding our underlying operational performance and our business and performance trends as they facilitate comparison with the performance of others in the financial services industry. Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 62 and 70, respectively, for the nine and three months ended September 30, 2023 and 2022.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Selected Financial Data

The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which follows, and with the unaudited Consolidated Financial Statements and related notes.


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
	(dollars in thousands, except per share data)
Net Income	$	39,231		$	33,968		$	112,236		$	92,448
Per Share Data:
Basic Earnings per Share	$	0.38		$	0.36		$	1.11		$	0.99
Diluted Earnings per Share	0.38			0.36			1.10			0.98
Cash Dividends Declared per Common Share	0.125			0.120			0.370			0.355
Average Balance:
Total assets	$	11,307,058		$	9,534,094		$	10,987,290		$	9,553,082
Total equity	1,249,441			1,063,334			1,215,433			1,078,038
End of Period Balance:
Net loans and leases (1)							$	8,800,515		$	7,266,635
Total assets							11,421,988			9,578,630
Total deposits							9,241,065			8,077,649
Total equity							1,240,531			1,022,575
Key Ratios:
Return on average assets	1.38		%	1.41		%	1.37		%	1.29		%
Return on average equity	12.46		%	12.67		%	12.35		%	11.47		%
Dividends payout ratio	32.89		%	33.33		%	33.33		%	35.86		%
Average equity to average assets ratio	11.05		%	11.15		%	11.06		%	11.28		%
Net interest margin	3.76		%	3.76		%	3.87		%	3.45		%
Net loans to deposits ratio							95.23		%	89.96		%

(1) Includes loans held for sale.

Results of Operations

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net Income

For the nine months ended September 30, 2023, First Commonwealth had net income of $112.2 million, or $1.10 diluted earnings per share, compared to net income of $92.4 million, or $0.98 diluted earnings per share, in the nine months ended September 30, 2022. The increase in net income was primarily the result of a $65.7 million increase in net interest income and a $6.0 million decrease in provision for credit losses, excluding the $10.7 million in provision expense related to the day 1 adjustment on non-PCD loans acquired in the Centric acquisition. Partially offsetting these positive changes was a $33.4 million increase in noninterest expense.

For the nine months ended September 30, 2023, the Company’s return on average equity was 12.35% and its return on average assets was 1.37%, compared to 11.47% and 1.29%, respectively, for the nine months ended September 30, 2022.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $290.9 million in the first nine months of 2023, compared to $225.0 million for the same period in 2022. The increase in net interest income can be attributed to growth in interest-earning assets and a 155 basis point increase in the yield on interest-earning assets offset by a 162 basis point increase in the cost of interest-bearing liabilities. Net interest income comprises the majority of our operating revenue (net interest income before

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

provision expense plus noninterest income), at 80.0% and 75.1% for the nine months ended September 30, 2023 and 2022, respectively.

The net interest margin on a fully taxable equivalent basis was 3.87% for the nine months ended September 30, 2023 and 3.45% for the nine months ended September 30, 2022. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The taxable equivalent yield on interest-earning assets was 5.14% for the nine months ended September 30, 2023, an increase of 155 basis points compared to the 3.59% yield for the same period in 2022. This change is a result of the higher interest rate environment in 2023 and resulted in the loan portfolio yield increasing by 152 basis points when compared to the nine months ended September 30, 2022. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased 251 basis points largely due to the Federal Reserve increasing short term interest rates by 225 basis points since September 30, 2022. Additionally, nine basis points of the increase in the yield on interest-earnings assets can be attributed to the recognition of $6.9 million in accretion of the purchase accounting marks, primarily from the Centric acquisition.

The investment portfolio yield increased 34 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $191.6 million as maturities and runoff funded loan growth. The yield on interest-bearing deposits with banks increased 460 basis points for the nine months ended September 30, 2023 as compared to the prior year, while the average balance decreased from an average of $240.5 million in 2022 to $197.5 million in 2023.

The cost of interest-bearing liabilities increased to 1.84% for the nine months ended September 30, 2023, from 0.22% for the same period in 2022. The cost of interest-bearing deposits increased 149 basis points and short-term borrowings increased 462 basis points in comparison to the same period last year. The increase in cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates offered in money market and time deposits. Comparing the nine months ended September 30, 2023 with the comparable period in 2022, average time deposits increased $535.4 million, or 150.8%, with an increase in the cost of these deposits of 277 basis points. Contributing to average growth in time deposits was an average of $81.0 million related to the Centric acquisition. Other interest-bearing deposits increased on average $497.3 million, or 9.9%, compared to the nine months ended September 30, 2022 and the cost of these deposits increased 126 basis points. Average growth in other-interest bearing deposits attributable to the Centric acquisition totaled $316.8 million.

For the nine months ended September 30, 2023, changes in rates positively impacted net interest income by $23.2 million when compared with the same period in 2022. The higher yield on interest-earning assets impacted net interest income by $107.9 million, while the increase in the cost of interest-bearing liabilities negatively impacted net interest income by $84.7 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $42.7 million for the nine months ended September 30, 2023, as compared to the same period in 2022. Higher levels of interest-earning assets resulted in an increase of $44.3 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $1.6 million. Average interest-earning assets for the nine months ended September 30, 2023 increased $1.3 billion, or 15.2%, compared to the same period in 2022. Average loans for the comparable period increased $1.6 billion, or 22.1%.

Net interest income was negatively impacted by a $8.5 million decrease in average net free funds for the nine months ended September 30, 2023 as compared to September 30, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The lower level of net free funds was primarily a result of lower noninterest-bearing demand deposits as customers became more rate sensitive in the increasing rate environment and an increase in noninterest-earning assets, largely due to the Centric acquisition.

The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the nine months ended September 30:

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


	2023		2022
	(dollars in thousands)
Interest income per Consolidated Statements of Income	$	385,741	$	233,672
Adjustment to fully taxable equivalent basis	923		759
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	386,664		234,431
Interest expense	95,802		9,478
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	290,862	$	224,953

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following is an analysis of the average balance sheets and net interest income on a fully taxable equivalent basis for the nine months ended September 30:


	2023						2022
	Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
	(dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	197,522	$	7,899	5.35	%	$	240,509	$	1,346	0.75	%
Tax-free investment securities	21,660		437		2.70		23,371		459		2.63
Taxable investment securities	1,208,061		19,762		2.19		1,397,982		19,332		1.85
Loans and leases, net of unearned income (b)(c)	8,627,203		358,566		5.56		7,065,213		213,294		4.04
Total interest-earning assets	10,054,446		386,664		5.14		8,727,075		234,431		3.59
Noninterest-earning assets:
Cash	111,732						113,538
Allowance for credit losses	(131,297)						(93,923)
Other assets	952,409						806,392
Total noninterest-earning assets	932,844						826,007
Total Assets	$	10,987,290					$	9,553,082
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	1,970,178	$	17,977	1.22	%	$	1,595,905	$	435	0.04	%
Savings deposits (d)	3,527,158		35,923		1.36		3,404,113		1,506		0.06
Time deposits	890,299		20,204		3.03		354,938		697		0.26
Short-term borrowings	402,782		14,237		4.73		104,343		89		0.11
Long-term debt	186,629		7,461		5.35		181,856		6,751		4.96
Total interest-bearing liabilities	6,977,046		95,802		1.84		5,641,155		9,478		0.22
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	2,592,373						2,701,458
Other liabilities	202,438						132,431
Shareholders’ equity	1,215,433						1,078,038
Total Noninterest-Bearing Funding Sources	4,010,244						3,911,927
Total Liabilities and Shareholders’ Equity	$	10,987,290					$	9,553,082
Net Interest Income and Net Yield on Interest-Earning Assets			$	290,862	3.87	%			$	224,953	3.45	%

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the nine months ended September 30, 2023 and 2022.

(b)Loan balances include held for sale and nonaccrual loans. Income on nonaccrual loans is accounted for on the cash basis.

(c)Loan income includes loan fees earned.

(d)Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table shows the effect of changes in volumes and rates on interest income and interest expense for the nine months ended September 30, 2023 compared with September 30, 2022:


	Analysis of Year-to-Year Changes in Net Interest Income
	Total Change		Change Due To Volume		Change Due To Rate (a)
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	6,553	$	(241)	$	6,794
Tax-free investment securities	(22)		(34)		12
Taxable investment securities	430		(2,628)		3,058
Loans and leases	145,272		47,199		98,073
Total interest income (b)	152,233		44,296		107,937
Interest-bearing liabilities:
Interest-bearing demand deposits	17,542		112		17,430
Savings deposits	34,417		55		34,362
Time deposits	19,507		1,041		18,466
Short-term borrowings	14,148		246		13,902
Long-term debt	710		177		533
Total interest expense	86,324		1,631		84,693
Net interest income	$	65,909	$	42,665	$	23,244

(a)Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.

(b)Changes in interest income have been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.

Provision for Credit Losses

The provision for credit losses is determined based on management’s estimates of the appropriate level of the allowance for credit losses needed for expected losses inherent in the loan portfolio and off-balance sheet commitments. The provision for credit losses is an amount added to the allowance, against which credit losses are charged.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The table below provides a breakout of the provision for credit losses by loan category for the nine months ended September 30:


	2023				2022
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	606	8	%	$	5,902	68	%
Time and demand	(2,632)		(36)		5,712		66
Commercial credit cards	22		—		194		2
Equipment finance	1,586		22		569		7
Time and demand other	1,630		22		(573)		(7)
Real estate construction	(2,243)		(30)		2,682		31
Construction other	(381)		(5)		1,736		20
Construction residential	(1,862)		(25)		946		11
Residential real estate	1,643		22		6,798		78
Residential first lien	1,634		22		5,562		64
Residential junior lien/home equity	9		—		1,236		14
Commercial real estate	3,960		54		(3,941)		(45)
Multifamily	347		5		1,273		15
Nonowner occupied	4,262		58		(7,940)		(91)
Owner occupied	(649)		(9)		2,726		31
Loans to individuals	3,421		46		(2,747)		(32)
Automobile and recreational vehicles	2,819		38		(3,416)		(40)
Consumer credit cards	100		1		255		3
Consumer other	502		7		414		5

Provision for credit losses on loans and leases	$	7,387	100	%	$	8,694	100	%
Provision for credit losses - acquisition day 1 non-PCD	10,653				—
Total provision for credit losses on loans and leases	18,040				8,694
Provision for off-balance sheet credit exposure	(1,362)				3,292
Total provision for credit losses	$	16,678			$	11,986

Total provision expense for the nine months ended September 30, 2023, increased $4.7 million compared to the nine months ended September 30, 2022. This increase is a result of $10.7 million in provision expense recognized in the first quarter of 2023 as the day 1 non-PCD provision expense resulting from the Centric acquisition offset by a $4.7 million decline in the provision for off-balance sheet commitments. The negative provision for off-balance sheet commitments for the nine months ended September 30, 2023 was a result of lower off-balance sheet commitments related to construction loans and improvement in the economic variables considered in the calculation.

The allowance for credit losses was $134.3 million, or 1.51%, of total loans and leases outstanding at September 30, 2023, compared to $102.9 million, or 1.35%, at December 31, 2022 and $96.1 million, or 1.31%, at September 30, 2022. Nonperforming loans as a percentage of total loans and leases increased to 0.54% at September 30, 2023 from 0.48% as of September 30, 2022 and 0.46% at December 31, 2022. The allowance to nonperforming loan ratio was 280.31%, 289.98% and 269.23% as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at September 30, 2023.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Below is an analysis of the consolidated allowance for credit losses for the nine months ended September 30, 2023 and 2022 and the year-ended December 31, 2022:


	September 30, 2023			September 30, 2022			December 31, 2022
	(dollars in thousands)
Balance, beginning of period	$	102,906		$	92,522		$	92,522
Day 1 allowance for credit loss on PCD acquired loans	27,205			—			—
Provision for credit losses - acquisition day 1 non-PCD	10,653			—			—
Loans charged off:
Commercial, financial, agricultural and other	9,102			1,836			2,361
Real estate construction	—			—			—
Residential real estate	384			263			339
Commercial real estate	1,689			1,887			2,487
Loans to individuals	4,649			3,113			4,658
Total loans charged off	15,824			7,099			9,845
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	352			313			394
Real estate construction	—			9			9
Residential real estate	128			143			187
Commercial real estate	142			351			769
Loans to individuals	1,388			1,160			1,349
Total recoveries	2,010			1,976			2,708
Net charge-offs	13,814			5,123			7,137
Provision for credit losses on loans and leases charged to expense	7,387			8,694			17,521
Balance, end of period	$	134,337		$	96,093		$	102,906
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.21		%	0.10		%	0.10		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding	1.51		%	1.31		%	1.35		%

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Income

The following table presents the components of noninterest income for the nine months ended September 30:


	2023		2022		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	7,967	$	8,063	$	(96)	(1)	%
Service charges on deposit accounts	15,842		14,695		1,147		8
Insurance and retail brokerage commissions	7,171		6,806		365		5
Income from bank owned life insurance	3,664		4,310		(646)		(15)
Card-related interchange income	21,422		20,607		815		4
Swap fee income	1,029		3,933		(2,904)		(74)
Other income	7,114		6,749		365		5
Subtotal	64,209		65,163		(954)		(1)
Net securities (losses) gains	(103)		2		(105)		(5,250)
Gain on sale of mortgage loans	3,175		4,328		(1,153)		(27)
Gain on sale of other loans and assets	5,004		4,511		493		11
Derivatives mark to market	27		395		(368)		(93)

Total noninterest income	$	72,312	$	74,399	$	(2,087)	(3)	%

Total noninterest income, excluding net securities gains (losses), gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market for the nine months ended September 30, 2023 decreased $1.0 million, or 1%, compared to the nine months ended September 30, 2022. Service charges on deposit accounts increased $1.1 million, of which $0.2 million can be attributed to the Centric acquisition and the remainder due to increased customer activity. Card-related interchange income increased $0.8 million as a result of increased customer activity. Trust income decreased $0.1 million due to declines in the value of assets under management, income from bank owned life insurance decreased $0.6 million compared to the prior period primarily due to changes in market interest rates and swap fee income declined $2.9 million due to a lower volume of interest rate swaps entered into by our commercial loan customers.

Total noninterest income decreased $2.1 million, or 3%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a $1.2 million decrease in gain on sale of mortgage loans as a result of changes in volume and the spread received on mortgage loans sold. The mark to market adjustment on interest rate swaps entered into for our commercial loan customers decreased $0.4 million. This adjustment does not reflect a realized gain or loss on the swaps, but rather relates to changes in fair value due to movements in corporate bond spreads and swap rates. The gain on sale of other loans and assets partially offset these declines with an increase of $0.5 million due to an increased volume of loans sold, primarily SBA loans, in the first nine months of 2023 compared to the same period in 2022. For the nine months ended September 30, 2023, $0.8 million in non-interest income can be attributed to the Centric acquisition.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Expense

The following table presents the components of noninterest expense for the nine months ended September 30:


	2023		2022		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	106,639	$	94,367	$	12,272	13	%
Net occupancy	14,584		13,586		998		7
Furniture and equipment	12,936		11,592		1,344		12
Data processing	11,024		10,379		645		6
Advertising and promotion	4,652		3,938		714		18

Pennsylvania shares tax	4,013		3,487		526		15
Intangible amortization	3,773		2,470		1,303		53

Other professional fees and services	4,376		3,622		754		21
FDIC insurance	4,614		2,196		2,418		110

Other operating	25,906		23,017		2,889		13
Subtotal	192,517		168,654		23,863		14
Loss on sale or write-down of assets	97		215		(118)		(55)


Merger and acquisition related	8,860		448		8,412		1,878



Litigation and operational losses	3,263		1,987		1,276		64
Total noninterest expense	$	204,737	$	171,304	$	33,433	20	%

Noninterest expense increased $33.4 million, or 20%, for the nine months ended September 30, 2023 compared to the same period in 2022. Contributing to the increase in expense in 2023 is $8.9 million in merger-related expenses associated with the Centric acquisition. Additionally, salaries and employee benefits increased $12.3 million primarily due to the number of full time equivalent employees, which increased from 1,422 at September 30, 2022 to 1,481 at September 30, 2023, largely due to the Centric acquisition. Also contributing to this increase was a $2.6 million increase in hospitalization expense as a result of the increase in full-time employees and higher claims in 2023. Litigation and operational losses increased $1.3 million primarily due to increased debit card losses and the implementation of a new debit card chargeoff processing system. Additionally, increases in net occupancy, furniture and equipment and intangible amortization all reflected increases primarily due to the Centric acquisition. Data processing costs increased $0.6 million due to continued investment in our digital banking and other product offerings. Contributing to the increase in other operating expenses were several expense categories, including printing and postage expense as a result of new customer disclosures, as well as travel and telephone, none of which were individually significant.

FDIC insurance increased $2.4 million due to both the impact of Centric as well as a 2 basis point increase in the FDIC deposit insurance assessment rate which began in the first quarterly assessment period of 2023. The assessment rate increase is estimated to increase the Company's annual FDIC assessment by approximately $1.7 million.

Income Tax

The provision for income taxes increased $5.7 million for the nine months ended September 30, 2023, compared to the corresponding period in 2022, due to the increase in income before income taxes.

We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the nine months ended September 30, 2023 and 2022.

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an effective tax rate of 20.3% and 19.8% for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, our deferred tax assets totaled $77.0 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved forecasts, evaluation of historical earning levels and consideration of potential tax strategies. If future events differ from our

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.

Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Net Income

For the three months ended September 30, 2023, First Commonwealth recognized net income of $39.2 million, or $0.38 diluted earnings per share, compared to net income of $34.0 million, or $0.36 diluted earnings per share, in the three months ended September 30, 2022. The increase in net income was primarily the result of a $15.4 million increase in net interest income offset by a $7.5 million increase in noninterest expense.

For the three months ended September 30, 2023, the Company’s return on average equity was 12.46% and its return on average assets was 1.38%, compared to 12.67% and 1.41%, respectively, for the three months ended September 30, 2022.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $98.1 million in the third quarter of 2023, compared to $82.6 million for the same period in 2022. Accretion of purchase accounting marks related to the Centric acquisition contributed 10 basis points to the net interest margin in the third quarter of 2023. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 79.7% and 76.1% for the three months ended September 30, 2023 and 2022, respectively.

The net interest margin, on a fully taxable equivalent basis, was 3.76% for both the three months ended September 30, 2023 and 2022.

The taxable equivalent yield on interest-earning assets was 5.37% for the three months ended September 30, 2023, an increase of 145 basis points compared to the 3.92% yield for the same period in 2022. This is largely due to a 148 basis point increase in the loan portfolio yield when compared to the three months ended September 30, 2022 as a result of a higher interest rate environment in 2023. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased 231 basis points largely due to the Federal Reserve increasing short term interest rates by 225 basis points since September 30, 2022. Additionally, nine basis points of the increase in the yield on interest-earnings assets can be attributed to the recognition of $2.4 million in accretion of purchase accounting marks, primarily as a result of the Centric acquisition.

The investment portfolio yield increased 42 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $110.2 million as maturities and runoff funded loan growth. The average balance of interest-bearing deposits with banks increased from $106.8 million in 2022 to $235.8 million in 2023 while the yield increased 349 basis points.

The cost of interest-bearing liabilities increased to 2.28% for the three months ended September 30, 2023, from 0.24% for the same period in 2022, primarily due to an increase in the cost of time deposits and savings deposits. The cost of interest-bearing deposits increased 145 basis points and short-term borrowings increased 504 basis points in comparison to the same period last year. The increase in cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates on money market and time deposits. Comparing the three months ended September 30, 2023 with the comparable period in 2022, average time deposits increased $717.9 million, or 213.4%, with an increase in the cost of these deposits of 324 basis points. Contributing to the average growth in time deposits was an average of $89.1 million related to the Centric acquisition. Other interest-bearing deposits increased on average $629.3 million, or 12.7%, compared to the three months ended September 30, 2022 and the cost of these deposits increased 160 basis points. The Centric acquisition contributed $374.0 million of the growth in other interest-bearing deposits.

For the three months ended September 30, 2023, changes in interest rates negatively impacted net interest income by $1.6 million when compared with the same period in 2022. The higher yield on loans contributed to interest-earning assets positively impacting net interest income by $36.4 million, while an increase in the cost of interest-bearing liabilities negatively impacted net interest income by $38.0 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $17.0 million during the three months ended September 30, 2023, as compared to the same period in 2022. The mix of interest-earning assets resulted in an increase of $17.8 million in interest income, while changes in the volume and mix of interest-

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

bearing liabilities increased interest expense by $0.8 million. Average interest-earning assets for the three months ended September 30, 2023 increased $1.6 billion, or 18.9%, compared to the same period in 2022. Average loans for the comparable period increased $1.6 billion, or 22.3%. Average time deposits for the three months ended September 30, 2023 increased by $717.9 million compared to the comparable period in 2022, increasing interest expense by $0.4 million.

Net interest income was negatively impacted by a $113.0 million decrease in average net free funds for the three months ended September 30, 2023 as compared to September 30, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The decline in the level of net free funds was primarily the result of a decrease in noninterest-bearing demand deposits as a result of customers becoming more rate sensitive as interest rates increased as well as an increase in noninterest-earning assets, primarily due to the Centric acquisition.

The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the three months ended September 30:


	2023		2022
	(dollars in thousands)
Interest income per Consolidated Statements of Income	$	139,885	$	85,700
Adjustment to fully taxable equivalent basis	313		261
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	140,198		85,961
Interest expense	42,128		3,340
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	98,070	$	82,621

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following is an analysis of the average balance sheets and net interest income on a fully taxable equivalent basis for the three months ended September 30:


	2023						2022
	Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
	(dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	235,761	$	3,346	5.63	%	$	106,841	$	577	2.14	%
Tax-free investment securities	21,439		144		2.66		22,584		147		2.58
Taxable investment securities	1,207,869		7,052		2.32		1,316,890		6,284		1.89
Loans and leases, net of unearned income (b)(c)	8,884,731		129,656		5.79		7,261,790		78,953		4.31
Total interest-earning assets	10,349,800		140,198		5.37		8,708,105		85,961		3.92
Noninterest-earning assets:
Cash	114,419						106,038
Allowance for credit losses	(135,340)						(95,385)
Other assets	978,179						815,336
Total noninterest-earning assets	957,258						825,989
Total Assets	$	11,307,058					$	9,534,094
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	2,014,623	$	7,608	1.50	%	$	1,603,810	$	222	0.05	%
Savings deposits (d)	3,567,000		15,842		1.76		3,348,469		599		0.07
Time deposits	1,054,216		9,235		3.48		336,346		207		0.24
Short-term borrowings	504,025		6,643		5.23		102,073		50		0.19
Long-term debt	187,122		2,800		5.94		181,596		2,262		4.94
Total interest-bearing liabilities	7,326,986		42,128		2.28		5,572,294		3,340		0.24
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	2,519,184						2,746,258
Other liabilities	211,447						152,208
Shareholders’ equity	1,249,441						1,063,334
Total noninterest-bearing funding sources	3,980,072						3,961,800
Total Liabilities and Shareholders’ Equity	$	11,307,058					$	9,534,094
Net Interest Income and Net Yield on Interest-Earning Assets			$	98,070	3.76	%			$	82,621	3.76	%

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the three months ended September 30, 2023 and 2022.

(b)Loan balances include held for sale and nonaccrual loans. Income on nonaccrual loans is accounted for on the cash basis.

(c)Loan income includes loan fees earned.

(d)Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table shows the effect of changes in volumes and rates on interest income and interest expense for the three months ended September 30, 2023 compared with September 30, 2022:


	Analysis of Year-to-Year Changes in Net Interest Income
	Total Change		Change Due To Volume		Change Due To Rate (a)
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	2,769	$	695	$	2,074
Tax-free investment securities	(3)		(7)		4
Taxable investment securities	768		(519)		1,287
Loans and leases	50,703		17,631		33,072
Total interest income (b)	54,237		17,800		36,437
Interest-bearing liabilities:
Interest-bearing demand deposits	7,386		52		7,334
Savings deposits	15,243		39		15,204
Time deposits	9,028		434		8,594
Short-term borrowings	6,593		192		6,401
Long-term debt	538		69		469
Total interest expense	38,788		786		38,002
Net interest income	$	15,449	$	17,014	$	(1,565)

(a)Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.

(b)Changes in interest income have been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.

Provision for Credit Losses

The provision for credit losses is determined based on management’s estimates of the appropriate level of the allowance for credit losses needed for probable losses inherent in the loan portfolio, after giving consideration to charge-offs and recoveries for the period. The provision for credit losses is an amount added to the allowance, against which credit losses are charged.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The table below provides a breakout of the provision for credit losses by loan category for the three months ended September 30:


	2023				2022
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	(2,645)	(55)	%	$	1,181	24	%
Time and demand	(3,914)		(82)		869		18
Commercial credit cards	9		—		3		—
Equipment finance	553		12		297		6
Time and demand other	707		15		12		—
Real estate construction	776		16		1,373		28
Construction other	1,207		25		1,414		29
Construction residential	(431)		(9)		(41)		(1)
Residential real estate	447		9		1,592		32
Residential first lien	553		11		1,161		23
Residential junior lien/home equity	(106)		(2)		431		9
Commercial real estate	4,338		91		(2,485)		(50)
Multifamily	46		1		868		18
Nonowner occupied	3,952		83		(4,186)		(85)
Owner occupied	340		7		833		17
Loans to individuals	1,851		39		3,290		66
Automobile and recreational vehicles	1,503		32		2,979		60
Consumer credit cards	38		1		244		5
Consumer other	310		6		67		1

Provision for credit losses on loans and leases	$	4,767	100	%	$	4,951	100	%
Provision for off-balance sheet credit exposure	1,118				972
Total provision for credit losses	$	5,885			$	5,923

The provision for credit losses on loans and leases for the three months ended September 30, 2023 decreased in comparison to the three months ended September 30, 2022 by $0.2 million. The level of provision expense in the third quarter of 2023 is primarily the result of an increase in loan balances and an additional $4.1 million in specific reserves for a commercial real estate loan as a result of an updated appraisal. The provision for off-balance sheet credit exposure increased $0.1 million primarily due to the level of unfunded commitments. Net charge-offs for the three months ended September 30, 2023 were $4.0 million, of which $1.2 million related to loans acquired from Centric for which an allowance for credit losses of $0.3 million was established as part of the purchase accounting marks.

The level of provision expense in the third quarter of 2022 was primarily the result of increases in loan balances. Net charge-offs for the three months ended September 30, 2022 were $2.5 million.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Below is an analysis of the consolidated allowance for credit losses for the three months ended September 30, 2023 and 2022 and the year-ended December 31, 2022:


	September 30, 2023		September 30, 2022		December 31, 2022
	(dollars in thousands)
Balance, beginning of period	$	133,546	$	93,603	$	92,522

Loans charged off:
Commercial, financial, agricultural and other	1,762		852		2,361
Real estate construction	—		—		—
Residential real estate	304		119		339
Commercial real estate	172		1,335		2,487
Loans to individuals	2,360		1,064		4,658
Total loans charged off	4,598		3,370		9,845
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	98		154		394
Real estate construction	—		9		9
Residential real estate	57		83		187
Commercial real estate	6		332		769
Loans to individuals	461		331		1,349
Total recoveries	622		909		2,708
Net charge-offs	3,976		2,461		7,137
Provision for credit losses on loans charged to expense	4,767		4,951		17,521
Balance, end of period	$	134,337	$	96,093	$	102,906

Noninterest Income

The following table presents the components of noninterest income for the three months ended September 30:


	2023		2022		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	2,949	$	2,777	$	172	6	%
Service charges on deposit accounts	5,600		5,194		406		8
Insurance and retail brokerage commissions	2,305		2,048		257		13
Income from bank owned life insurance	1,242		1,419		(177)		(12)
Card-related interchange income	7,221		6,980		241		3
Swap fee income	452		2,326		(1,874)		(81)
Other income	2,828		2,586		242		9
Subtotal	22,597		23,330		(733)		(3)
Net securities gains	(103)		—		(103)		N/A
Gain on sale of mortgage loans	1,270		1,485		(215)		(14)
Gain on sale of other loans and assets	1,027		1,093		(66)		(6)
Derivatives mark to market	35		6		29		483

Total noninterest income	$	24,826	$	25,914	$	(1,088)	(4)	%

Total noninterest income for the three months ended September 30, 2023 decreased $1.1 million compared to the three months ended September 30, 2022. The most significant changes include a decrease of $1.9 million in swap fee income due to a lower volume of interest rate swaps entered into by our commercial loan customers. Also impacting noninterest income was a $0.2 million decrease in gain on sale of mortgage loans due to changes in the volume and spreads on mortgage loans sold and a $0.1 million decrease in gain on sale of other loans and assets due to an decrease in the market value of SBA loans sold during the quarter. Partially offsetting these decreases were service charges on deposits, which increased $0.4 million due to growth in customer accounts and transactions and a $0.2 million increase in card-related interchange income.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Expense

The following table presents the components of noninterest expense for the three months ended September 30:


	2023		2022		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	35,640	$	32,486	$	3,154	10	%
Net occupancy	4,782		4,629		153		3
Furniture and equipment	4,414		4,005		409		10
Data processing	3,857		3,721		136		4
Advertising and promotion	1,662		1,278		384		30
Pennsylvania shares tax	1,588		1,569		19		1
Intangible amortization	1,344		746		598		80

Other professional fees and services	1,603		1,204		399		33
FDIC insurance	1,920		796		1,124		141

Other operating	8,548		8,207		341		4
Subtotal	65,358		58,641		6,717		11
Loss on sale or write-down of assets	50		54		(4)		(7)


Merger and acquisition related	379		448		(69)		(15)



Litigation and operational losses	1,626		758		868		115
Total noninterest expense	$	67,413	$	59,901	$	7,512	13	%

Noninterest expense increased $7.5 million, or 13%, for the three months ended September 30, 2023 compared to the same period in 2022. The increase is a result of a $3.2 million increase in salary and employee benefit expense, primarily due to a $0.4 million increase in hospitalization expense as well as the impact of 59 additional full-time equivalent employees, largely due to the Centric acquisition.

FDIC insurance increased $1.1 million due to both the impact of Centric as well as a 2 basis point increase in the FDIC deposit insurance assessment rate, which began in the first quarterly assessment period of 2023. Litigation and operational losses increased $0.9 million primarily due to increased debit card losses and the implementation of a new debit card chargeoff processing system. The $0.6 million increase in intangible amortization expense is related to amortization of Centric's core deposit intangible.

Income Tax

The provision for income taxes increased $1.57 million for the three months ended September 30, 2023, compared to the corresponding period in 2022. The effective tax rate increased 40 basis points from 20.0% for the three months ended September 30, 2022 to 20.4% for the three months ended September 30, 2023.

Liquidity

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs with cost-effective funding. We generate funds to meet these needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first nine months of 2023, the maturity and redemption of investment securities provided $140.7 million in liquidity. These funds contributed to the liquidity used to originate loans, purchase investment securities and fund depositor withdrawals.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following represents our expanded sources of liquidity as of September 30, 2023:


	Total Available		Amount Used		Outstanding Letters of Credit		Net Available
	(dollars in thousands)
Internal liquidity sources
Unencumbered securities	$	685,309	$	—	$	—	$	685,309
Other (excess pledged)	40,783		—		—		40,783
External liquidity sources
FHLB advances	2,408,203		504,310		558,160		1,345,733
FRB borrowings	1,076,320		—		—		1,076,320
Lines with other financial institutions	160,000		—		—		160,000

Brokered deposits (1)	1,139,321		28,159		—		1,111,162

Total liquidity	$	5,509,936	$	532,469	$	558,160	$	4,419,307

(1) Reflects internal policy limit. Maximum capacity with CDARs is $1.7 billion.

The brokered deposits included in the table above are a result of our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of September 30, 2023, the outstanding balance of $28.2 million carried an average weighted rate of 3.61% and an average original term of 261 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

Liquidity available through the Federal Reserve is a result of the FRB Borrower-in-Custody of Collateral program, which enables us to take certain loans that are not being used as collateral at the FHLB and pledge them as collateral for borrowings at the FRB.

During the nine months ended September 30, 2023, the Company increased its liquidity by purchasing $558.2 million in letters of credit from the FHLB of Pittsburgh, which were then used to secure public deposits. This resulted in a similar amount of previously pledged securities becoming unencumbered. Additionally, as of September 30, 2023, new short-term borrowings in the amount of $150.0 million were entered into in order to provide additional on-balance sheet liquidity.

First Commonwealth’s long-term liquidity source is its core deposit base. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. The following table shows a breakdown of the components of First Commonwealth’s deposits:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Noninterest-bearing demand deposits(a)	$	2,535,704	$	2,670,508
Interest-bearing demand deposits(a)	632,062		357,769
Savings deposits(a)	4,928,607		4,572,183
Time deposits	1,144,692		405,009
Total	$	9,241,065	$	8,005,469

(a)Balances include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.

The level of deposits during any period is influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds.

During the first nine months of 2023, total deposits increased $1.2 billion, of which $757.0 million were acquired as part of the Centric acquisition. Interest-bearing demand and savings deposits increased $630.7 million, time deposits increased $739.7 million and noninterest-bearing demand deposits decreased $134.8 million.

The estimated total of uninsured deposits was $2.6 billion at September 30, 2023 and $2.1 billion at December 31, 2022, of which $0.9 billion and $0.7 billion were secured by pledged investment securities or letters of credit at September 30, 2023 and December 31, 2022, respectively. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Market Risk

The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate-sensitive assets to rate-sensitive liabilities repricing within a one-year period was 0.72 and 0.76 at September 30, 2023 and December 31, 2022, respectively. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.

Gap analysis has limitations due to the static nature of the model that holds volumes and consumer behaviors constant in all economic and interest rate scenarios. A lower level of rate sensitive assets to rate sensitive liabilities repricing in one year could indicate reduced net interest income in a rising interest rate scenario, and conversely, increased net interest income in a declining interest rate scenario. However, the gap analysis incorporates only the level of interest-earning assets and interest-bearing liabilities and not the sensitivity each has to changes in interest rates. The impact of the sensitivity to changes in interest rates is provided in the table below the gap analysis.

The following is the gap analysis as of September 30, 2023 and December 31, 2022:


	September 30, 2023
	0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
	(dollars in thousands)
Loans and leases	$	3,540,071		$	420,813		$	730,576		$	4,691,460		$	3,158,018		$	980,490
Investments	47,877			42,745			79,019			169,641			508,687			724,221
Other interest-earning assets	212,993			—			—			212,993			1,095			—
Total interest-sensitive assets (ISA)	3,800,941			463,558			809,595			5,074,094			3,667,800			1,704,711
Certificates of deposit	235,284			250,514			355,913			841,711			302,055			1,019
Other deposits	5,560,669			—			—			5,560,669			—			—
Borrowings	673,053			206			413			673,672			53,166			318
Total interest-sensitive liabilities (ISL)	6,469,006			250,720			356,326			7,076,052			355,221			1,337
Gap	$	(2,668,065)		$	212,838		$	453,269		$	(2,001,958)		$	3,312,579		$	1,703,374
ISA/ISL	0.59			1.85			2.27			0.72			10.33			1,275.03
Gap/Total assets	23.36		%	1.86		%	3.97		%	17.53		%	29.00		%	14.91		%


	December 31, 2022
	0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
	(dollars in thousands)
Loans and leases	$	3,164,495		$	354,556		$	575,640		$	4,094,691		$	2,498,042		$	978,319
Investments	46,426			35,579			74,962			156,967			461,699			734,221
Other interest-earning assets	29,919			—			—			29,919			71			—
Total interest-sensitive assets (ISA)	3,240,840			390,135			650,602			4,281,577			2,959,812			1,712,540
Certificates of deposit	71,976			56,539			102,037			230,552			173,810			955
Other deposits	4,929,952			—			—			4,929,952			—			—
Borrowings	445,065			50,204			407			495,676			3,256			50,791
Total interest-sensitive liabilities (ISL)	5,446,993			106,743			102,444			5,656,180			177,066			51,746
Gap	$	(2,206,153)		$	283,392		$	548,158		$	(1,374,603)		$	2,782,746		$	1,660,794
ISA/ISL	0.59			3.65			6.35			0.76			16.72			33.10
Gap/Total assets	22.50		%	2.89		%	5.59		%	14.02		%	28.38		%	16.94		%

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table presents an analysis of the potential sensitivity of our annual net interest income to gradual changes in interest rates over a 12-month time frame as compared with net interest income if rates remained unchanged and there are no changes in balance sheet categories.


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
September 30, 2023 ($)	$	(9,359)		$	(3,988)		$	5,717		$	9,993
September 30, 2023 (%)	(2.32)		%	(0.99)		%	1.42		%	2.48		%

December 31, 2022 ($)	$	(11,973)		$	(5,486)		$	5,902		$	11,413
December 31, 2022 (%)	(3.12)		%	(1.43)		%	1.54		%	2.98		%

The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
September 30, 2023 ($)	$	(38,846)		$	(17,653)		$	16,962		$	31,593
September 30, 2023 (%)	(9.64)		%	(4.38)		%	4.21		%	7.84		%

December 31, 2022 ($)	$	(45,361)		$	(20,166)		$	18,626		$	36,011
December 31, 2022 (%)	(11.83)		%	(5.26)		%	4.86		%	9.39		%

The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment. Results of the 200 basis point interest rate decline scenario is affected by the fact that many of our interest-bearing liabilities are at rates below 2%, with an assumed floor of zero in the model. In the nine months ended September 30, 2023 and 2022, the cost of our interest-bearing liabilities averaged 1.84% and 0.22%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.14% and 3.59%, respectively.

Asset/liability models require that certain assumptions be made, such as prepayment rates on earning assets and the impact of pricing on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans and published industry experience. While management believes such assumptions to be reasonable, there can be no assurance that modeled results will approximate actual results.

Credit Risk

First Commonwealth maintains an allowance for credit losses at a level deemed sufficient for losses inherent in the loan and lease portfolio at the date of each statement of financial condition. Management reviews the appropriateness of the allowance on a quarterly basis to ensure that the provision for credit losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is appropriate based on management’s assessment of probable estimated losses.

First Commonwealth’s methodology for assessing the appropriateness of the allowance for credit losses consists of several key elements. These elements include an assessment of individual nonperforming loans with a balance greater than $250 thousand, loss experience trends and other relevant factors.

First Commonwealth also maintains a reserve for unfunded loan commitments and letters of credit based upon credit risk and probability of funding. The reserve totaled $8.9 million at September 30, 2023 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

We discontinue interest accruals on a loan when, based on current information and events, it is probable that we will be unable to fully collect principal or interest due according to the contractual terms of the loan. A loan is also placed on nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Nonperforming loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The probable risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows. Losses or a specifically assigned allowance for loan losses are recognized where appropriate.

Nonperforming loans and leases, including loans held for sale, increased $12.4 million to $47.9 million at September 30, 2023, compared to $35.5 million at December 31, 2022. The increase in nonperforming loans is primarily a result of $22.0 million in loans acquired from Centric as well as an additional $1.2 million moved to nonaccrual during the first nine months of 2023. Offsetting this is the removal of $6.4 million in accruing TDR's as well as the transfer of a $3.5 million commercial real estate relationship back to accruing status. The TDR's were eliminated as a result of our adoption of ASU 2022-02. The adoption of this guidance was effective January 1, 2023.

The allowance for credit losses as a percentage of nonperforming loans was 280.31% as of September 30, 2023, compared to 289.98% at December 31, 2022, and 269.23% at September 30, 2022. The amount of individually assessed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals and updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of $16.6 million and general reserves of $117.7 million as of September 30, 2023. Specific reserves increased $15.9 million from December 31, 2022, and $15.1 million from September 30, 2022 primarily as a result of individually analyzed PCD loans acquired from Centric as well as a $4.1 million specific reserve recognized in third quarter of 2023 due to an updated appraisal received for one commercial real estate borrower.

Criticized loans totaled $193.2 million at September 30, 2023 and represented 2% of the loan portfolio. The level of criticized loans increased as of September 30, 2023 when compared to December 31, 2022, by $60.3 million, or 45%. Classified loans totaled $66.3 million at September 30, 2023 compared to $44.4 million at December 31, 2022, an increase of $21.8 million, or 49%. The increase in criticized loans is the result of $67.2 million in criticized loans acquired as part of the Centric acquisition.

The allowance for credit losses was $134.3 million at September 30, 2023, or 1.51% of total loans and leases outstanding, compared to 1.35% reported at December 31, 2022, and 1.31% at September 30, 2022. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were 1.33% at September 30, 2023 compared to 1.34% at December 31, 2022 and 1.29% at September 30, 2022.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table provides information related to nonperforming assets, the allowance for credit losses and other credit-related measurements:


	September 30,								December 31, 2022
	2023				2022
	(dollars in thousands)
Nonperforming Loans:
Loans on nonaccrual basis	$	47,924			$	20,495				$	20,193

Troubled debt restructured loans on nonaccrual basis					8,981					8,852
Troubled debt restructured loans on accrual basis					6,216					6,442
Total nonperforming loans	$	47,924			$	35,692				$	35,487
Loans past due 30 to 90 days and still accruing	$	19,957			$	7,857				$	17,949
Loans past due in excess of 90 days and still accruing	$	2,484			$	1,548				$	1,991
Other real estate owned	$	765			$	322				$	534
Loans held for sale at end of period	$	33,127			$	13,811				$	11,869
Portfolio loans and leases outstanding at end of period	$	8,901,725			$	7,348,917				$	7,642,143
Average loans and leases outstanding	$	8,627,203		(a)	$	7,065,213		(a)		$	7,172,624		(b)
Nonperforming loans as a percentage of total loans and leases	0.54		%		0.48		%			0.46		%
Provision for credit losses on loans and leases (e)	$	7,387		(a)	$	8,694		(a)		$	17,521		(b)
Provision for credit losses - acquisition day 1 non-PCD	$	10,653			$	—				$	—
Allowance for credit losses	$	134,337			$	96,093				$	102,906
Net charge-offs	$	13,814		(a)	$	5,123		(a)		$	7,137		(b)
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.21		%		0.10		%			0.10		%
Provision for credit losses as a percentage of net charge-offs (e)	53.47		%	(a)	169.71		%	(a)		245.50		%	(b)
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	1.51		%		1.31		%			1.35		%



Allowance for credit losses as a percentage of nonperforming loans (d)	280.31		%		269.23		%			289.98		%

(a)For the nine-month period ended.

(b)For the twelve-month period ended.

(c)Does not include loans held for sale.

(d)Does not include nonperforming loans held for sale.

(e)Does not include provision for credit losses on loans and leases - acquisition day 1 non-PCD.

The following tables show the outstanding balances of our loan and lease portfolio and the breakdown of net charge-offs and nonperforming loans, excluding loans held for sale, by loan type as of and for the periods presented:


	September 30, 2023								December 31, 2022
	Originated		Acquired (1)		Total		%		Amount		%
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,249,654	$	246,367	$	1,496,021	17	%	$	1,211,706	16	%
Real estate construction	494,432		81,115		575,547		7		513,101		7
Residential real estate	2,326,265		88,516		2,414,781		27		2,194,669		29
Commercial real estate	2,515,985		534,099		3,050,084		34		2,425,012		31
Loans to individuals	1,364,629		663		1,365,292		15		1,297,655		17
Total loans and leases, net of unearned income	$	7,950,965	$	950,760	$	8,901,725	100	%	$	7,642,143	100	%

(1) Includes January 31, 2023 balance of loans acquired as part of the Centric acquisition plus day 1 gross up of PCD loans.

During the nine months ended September 30, 2023, originated loans and leases increased $308.8 million, or 4.0%, compared to balances outstanding at December 31, 2022. As provided in the table above, at the time of acquisition, Centric provided $950.8 million of loan growth.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Excluding the impact of Centric, real estate construction loans decreased $18.7 million, or 3.6%, due to the completion of commercial real estate projects. Residential real estate grew $131.6 million, or 6.0%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $91.0 million, or 3.8%, primarily due to growth in loans secured by nonresidential property due in part to the completion of several construction projects. Loans to individuals increased $67.0 million, or 5.2%, primarily due to growth in the indirect auto and recreational vehicle portfolio. Commercial, financial, agricultural and other loans increased $37.9 million, or 3.1%, as a result of growth in the equipment finance portfolio.

As indicated in the table below, commercial real estate and commercial, financial and agricultural and other loans represent a significant portion of the nonperforming loans as of September 30, 2023.


	For the Nine Months Ended September 30, 2023						As of September 30, 2023
	Net Charge- offs		% of Total Net Charge-offs		Net Charge- offs as a % of Average Loans (annualized)		Nonperforming Loans		% of Total Nonperforming Loans		Nonperforming Loans as a % of Total Loans
	(dollars in thousands)
Commercial, financial, agricultural and other	$	8,750	63.34	%	0.14	%	$	17,900	37.35	%	0.20	%
Real estate construction	—		—		—		3,288		6.86		0.04
Residential real estate	256		1.85		—		7,750		16.17		0.09
Commercial real estate	1,547		11.20		0.02		18,784		39.20		0.21
Loans to individuals	3,261		23.61		0.05		202		0.42		—
Total loans and leases, net of unearned income	$	13,814	100.00	%	0.21	%	$	47,924	100.00	%	0.54	%

Net charge-offs for the nine months ended September 30, 2023 totaled $13.8 million, compared to $5.1 million for the nine months ended September 30, 2022. The most significant charge-offs during the nine months ended September 30, 2023 included $8.8 million in charge-offs related to loans acquired from Centric, of which an allowance for credit losses of $7.4 million was established as a result of purchase accounting marks. Additionally, $3.3 million in charge-offs relate to loans to individuals, primarily indirect auto loans and personal credit lines. See discussions related to the provision for credit losses and loans for more information.

Capital Resources

At September 30, 2023, shareholders’ equity was $1.2 billion, an increase of $188.5 million from December 31, 2022. The increase was primarily the result of $141.4 million in stock issued as part of the Centric acquisition and $112.2 million in net income. Offsetting these increases was a $16.4 million decrease in the fair value of available for sale investments and interest rate swaps, which is reflected in the Other Comprehensive Income component of capital. Other items impacting capital include an increase due to $3.4 million in treasury stock sales and decreases due to $38.1 million of dividends paid to shareholders and $14.1 million of common stock repurchases. Cash dividends declared per common share were $0.370 for the nine months ended September 30, 2023.

First Commonwealth and First Commonwealth Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on First Commonwealth’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Commonwealth and First Commonwealth Bank must meet specific capital guidelines that involve quantitative measures of First Commonwealth’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. First Commonwealth’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Effective January 1, 2015, the Company became subject to the new regulatory risk-based capital rules adopted by the federal banking agencies implementing Basel III. The most significant changes included higher minimum capital requirements, as the minimum Tier I capital ratio increased from 4.0% to 6.0% and a new common equity Tier I capital ratio was established with a minimum level of 4.5%. Additionally, the rules improved the quality of capital by providing stricter eligibility criteria for regulatory capital instruments and provide for a phase-in, beginning January 1, 2016, of a capital conservation buffer of 2.5% of risk-weighted assets. This buffer, which was fully phased-in as of January 1, 2019, provides a requirement to hold common equity Tier 1 capital above the minimum risk-based capital requirements, resulting in an effective common equity Tier I risk-weighted asset minimum ratio of 7.0% on a fully phased-in basis.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the existing treatment for accumulated other comprehensive income, which currently does not affect regulatory capital. The Company elected to retain this treatment, which reduces the volatility of regulatory capital levels.

In 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in subordinated debt, which under the regulatory rules qualifies as Tier II capital. As of September 30, 2023, this subordinated debt issuance increased the total risk-based capital ratio by 95 basis points.

In March 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the pandemic. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). The Company adopted CECL effective January 1, 2020 and elected to implement the five-year transition. Regulatory capital levels without the capital benefit at September 30, 2023 for both First Commonwealth and First Commonwealth Bank would have continued to be greater than the amounts needed to be considered “well capitalized”, as the transition provided a capital benefit of approximately 9 to 12 basis points.

As of September 30, 2023, First Commonwealth and First Commonwealth Bank met all capital adequacy requirements to which they are subject and were considered well-capitalized under the regulatory rules. To be considered well capitalized, the Company must maintain minimum Total risk-based capital, Tier I risk-based capital, Tier I leverage ratio and Common equity tier I risk-based capital as set forth in the table below:


	Actual				Minimum Capital Required			Required to be Considered Well Capitalized
	Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
	(dollars in thousands)
Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,291,970	13.79	%		$	983,466	10.50	%	$	936,634	10.00	%
First Commonwealth Bank	1,208,405		12.93			981,676		10.50		934,929		10.00
Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,090,578	11.64	%		$	796,139	8.50	%	$	749,307	8.00	%
First Commonwealth Bank	1,007,013		10.77			794,690		8.50		747,943		8.00
Tier I Capital to Average Assets
First Commonwealth Financial Corporation	$	1,090,578	9.85	%		$	443,002	4.00	%	$	553,752	5.00	%
First Commonwealth Bank	1,007,013		9.12			441,488		4.00		551,859		5.00
Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,020,578	10.90	%		$	655,644	7.00	%	$	608,812	6.50	%
First Commonwealth Bank	1,007,013		10.77			654,451		7.00		607,704		6.50

On October 24, 2023, First Commonwealth Financial Corporation declared a quarterly dividend of $0.125 per share payable on November 17, 2023 to shareholders of record as of November 3, 2023. The timing and amount of future dividends are at the discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.

In October 2021, a share repurchase program was authorized by the Board of Directors for up to an additional $25.0 million in shares of the Company's common stock. On April 24, 2023, the Board of Directors authorized a $25 million increase in the share repurchase program. As of September 30, 2023, 2,418,393 common shares had been repurchased under theses program at an average price of $13.12 per share.

New Accounting Pronouncements

In March 2023, FASB released Accounting Standards Update 2023-02 (“ASU 2023-02”), Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, instead of only low-income housing tax credit (“LIHTC”) structures, if certain conditions are met. ASU 2023-02 also eliminates certain LIHTC-specific guidance for LIHTC investments that are not accounted for using the proportional amortization method and instead require that those LIHTC investments be accounted for using other applicable guidance under GAAP. ASU 2023-02 is effective for the Company for

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

Table of Contents

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Information appearing in Item 2 of this report under the caption “Market Risk” is incorporated by reference in response to this item.

ITEM 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission.

Table of Contents

PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1. LEGAL PROCEEDINGS

The information required by this item is set forth in Part I, Item 1, Note 6, "Commitments and Contingent Liabilities," which is incorporated herein by reference in response to this item.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, except for the following risk factor.

Risks Related to Recent Events Impacting the Financial Services Industry

Recent events impacting the financial services industry, including the failure of Silicon Valley Bank and Signature Bank, have resulted in decreased confidence in banks among some consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These recent events have, and could continue to have, an adverse impact on the market price and volatility of the Company’s common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business. Inability to access short-term funding, loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization. We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses. The cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 26, 2021, a share repurchase program was authorized for up to $25.0 million in shares of the Company's common stock with a $25 million increase in April of 2023. The following table details the amount of shares repurchased under this program in the third quarter of 2023:


Month Ending:	Total Number of Shares Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs*
July 31, 2023	38,700	$	12.47	38,700	1,452,660
August 31, 2023	—	—		—	1,604,928
September 30, 2023	220,939	12.34		220,939	1,494,759
Total	259,639	$	12.36	259,639

* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $14.44 at July 31, 2023, $13.07 at August 31, 2023 and $12.21 at September 30, 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 6. EXHIBITS

Exhibit
Number

Description

Incorporated by Reference to

31.1

Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1

Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.2

Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

101

The following materials from First Commonwealth Financial Corporation’s Quarterly Report on Form 10-Q, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Consolidated Financial Statements. Note that XBRL tags are embedded within the document.

Filed herewith

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SIGNATURES

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

FIRST COMMONWEALTH FINANCIAL CORPORATION

(Registrant)


DATED: November 7, 2023						/s/ T. Michael Price
						T. Michael Price President and Chief Executive Officer

DATED: November 7, 2023						/s/ James R. Reske
						James R. Reske Executive Vice President, Chief Financial Officer and Treasurer