FIRST COMMONWEALTH FINANCIAL CORP /PA/ [FCF] Filings

10-Q 1 fcf-20240331.htm 10-Q fcf-20240331

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 March 31, 2024


☐			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 May 6, 2024, was 102,297,222.

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)	8
	Notes to the Unaudited Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	73

ITEM 4.	Controls and Procedures	73

PART II.	Other Information

ITEM 1.	Legal Proceedings	74

ITEM 1A.	Risk Factors	74

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74

ITEM 3.	Defaults Upon Senior Securities	74

ITEM 4.	Mine Safety Disclosures	74

ITEM 5.	Other Information	74

ITEM 6.	Exhibits	75

	Signatures	76

Table of Contents

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)


	March 31, 2024		December 31, 2023

	(dollars in thousands, except share data)
Assets
Cash and due from banks	$	77,179	$	125,436
Interest-bearing bank deposits	233,188		21,557
Securities available for sale, at fair value	1,023,711		1,020,986
Securities held to maturity, at amortized cost (Fair value of $393,749 and $350,595 at March 31, 2024 and December 31, 2023, respectively)	464,708		419,009
Other investments	25,397		50,871
Loans held for sale	31,895		29,820
Loans and leases:
Portfolio loans and leases	8,999,870		8,968,761
Allowance for credit losses	(119,098)		(117,718)
Net loans and leases	8,880,772		8,851,043
Premises and equipment, net	118,710		121,015
Other real estate owned	368		422
Goodwill	363,715		363,715
Amortizing intangibles, net	22,030		22,820
Bank owned life insurance	229,455		228,479
Other assets	223,280		204,315
Total assets	$	11,694,408	$	11,459,488
Liabilities
Deposits (all domestic):
Noninterest-bearing	$	2,334,495	$	2,388,533
Interest-bearing	7,111,908		6,803,776
Total deposits	9,446,403		9,192,309
Short-term borrowings	546,541		597,835
Subordinated debentures	177,803		177,741
Other long-term debt	3,932		4,122
Capital lease obligation	4,755		4,894
Total long-term debt	186,490		186,757
Other liabilities	182,254		168,313
Total liabilities	10,361,688		10,145,214
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 shares issued at both March 31, 2024 and December 31, 2023, respectively, and 102,303,974 and 102,114,664 shares outstanding at March 31, 2024 and December 31, 2023, respectively	123,603		123,603
Additional paid-in capital	630,837		630,154
Retained earnings	905,897		881,112
Accumulated other comprehensive loss, net	(119,097)		(111,756)
Treasury stock (21,299,406 and 21,488,716 shares at March 31, 2024 and December 31, 2023, respectively)	(208,520)		(208,839)

Total shareholders’ equity	1,332,720		1,314,274
Total liabilities and shareholders’ equity	$	11,694,408	$	11,459,488

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
	March 31,
		2024		2023
		(dollars in thousands, except share data)
Interest Income
Interest and fees on loans and leases		$	132,760	$	107,668
Interest and dividends on investments:
Taxable interest		10,417		5,789
Interest exempt from federal income taxes		108		117
Dividends		604		505
Interest on bank deposits		1,573		510
Total interest income		145,462		114,589
Interest Expense
Interest on deposits		43,720		15,518
Interest on short-term borrowings		6,765		2,401
Interest on subordinated debentures		2,587		2,214
Interest on other long-term debt		38		45
Interest on lease obligations		48		53

Total interest expense		53,158		20,231
Net Interest Income		92,304		94,358
Provision for credit losses		4,238		(2,650)
Provision for credit losses - acquisition day 1 non-PCD		—		10,653
Net Interest Income after Provision for Credit Losses		88,066		86,355
Noninterest Income




Trust income		2,727		2,486
Service charges on deposit accounts		5,383		4,918
Insurance and retail brokerage commissions		2,246		2,552
Income from bank owned life insurance		1,294		1,227
Gain on sale of mortgage loans		1,328		652
Gain on sale of other loans and assets		2,051		2,086
Card-related interchange income		6,690		6,829
Derivatives mark to market		12		(89)

Swap fee income		—		245
Other income		2,257		2,057
Total noninterest income		23,988		22,963
Noninterest Expense
Salaries and employee benefits		35,324		34,264
Net occupancy		5,334		5,018
Furniture and equipment		4,480		4,238
Data processing		3,824		3,404
Advertising and promotion		1,319		1,663

Pennsylvania shares tax		1,202		1,252
Intangible amortization		1,264		1,147

Other professional fees and services		1,242		1,591
FDIC insurance		1,613		1,417
Loss on sale or write-down of assets		143		41

Litigation and operational losses		997		743

Merger and acquisition related		114		8,541



Other operating		8,717		8,062
Total noninterest expense		65,573		71,381
Income Before Income Taxes		46,481		37,937
Income tax provision		8,932		7,713
Net Income		$	37,549	$	30,224

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

Table of Contents


	For the Three Months Ended
	March 31,
		2024		2023
		(dollars in thousands, except share data)
Average Shares Outstanding		101,981,248		99,560,831
Average Shares Outstanding Assuming Dilution		102,198,899		99,779,816

Per Share Data: Basic Earnings per Share		$	0.37	$	0.30
Diluted Earnings per Share		$	0.37	$	0.30
Cash Dividends Declared per Common Share		$	0.125	$	0.120

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
	March 31,
		2024		2023
		(dollars in thousands)
Net Income		$	37,549	$	30,224
Other comprehensive (loss) income, before tax benefit (expense):
Unrealized holding (losses) gains on securities arising during the period		(9,875)		10,355

Less: reclassification adjustment for gains on securities included in net income		—		—
Unrealized holding gains on derivatives arising during the period		583		5,806

Total other comprehensive (loss) income, before tax benefit (expense)		(9,292)		16,161
Income tax benefit (expense) related to items of other comprehensive (loss) income		1,951		(3,039)
Total other comprehensive (loss) income		(7,341)		13,122
Comprehensive Income		$	30,208	$	43,346

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, 2023	102,114,664	$	123,603	$	630,154	$	881,112	$	(111,756)	$	(208,839)	$	1,314,274


Net income						37,549						37,549
Other comprehensive loss								(7,341)				(7,341)
Cash dividends declared ($0.125 per share)						(12,764)						(12,764)




Treasury stock acquired	(130,862)									(1,757)		(1,757)
Treasury stock reissued	215,100			254		—				2,071		2,325
Restricted stock	105,072	—		429		—				5		434

Balance at March 31, 2024	102,303,974	$	123,603	$	630,837	$	905,897	$	(119,097)	$	(208,520)	$	1,332,720


	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						30,224						30,224
Other comprehensive income								13,122				13,122
Cash dividends declared ($0.120 per share)						(12,367)						(12,367)




Treasury stock acquired	(109,112)									(1,732)		(1,732)
Treasury stock reissued	143,412			610		—				1,356		1,966
Restricted stock	94,035	—		488		—				(116)		372
Common stock issuance	9,688,478	9,688		131,667								141,355
Balance at March 31, 2023	103,193,127	$	123,603	$	630,196	$	792,720	$	(124,570)	$	(196,935)	$	1,225,014

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 Three Months Ended
	March 31,
	2024		2023
Operating Activities	(dollars in thousands)
Net income	$	37,549	$	30,224
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses	4,238		8,003
Deferred tax expense	2,797		2,218
Depreciation and amortization	1,501		1,847
Net gains on securities and other assets	(3,199)		(2,330)
Net amortization of premiums and discounts on securities	242		378

Income from increase in cash surrender value of bank owned life insurance	(1,294)		(1,190)
(Increase) decrease in interest receivable	(746)		645
Mortgage loans originated for sale	(43,587)		(31,165)
Proceeds from sale of mortgage loans	36,926		32,462
Increase in interest payable	5,126		2,146
Increase in income taxes payable	5,925		5,512

Other-net	(5,833)		(10,150)
Net cash provided by operating activities	39,645		38,600
Investing Activities
Transactions with securities held to maturity:
Proceeds from maturities and redemptions	9,250		9,733
Purchases	(55,076)		—
Transactions with securities available for sale:
Proceeds from sales	—		30,686
Proceeds from maturities and redemptions	35,970		25,791
Purchases	(48,684)		—
Purchases of FHLB stock	(13,627)		(18,262)
Proceeds from the redemption of FHLB stock	39,101		21,134
Proceeds from bank owned life insurance	—		1,216
Proceeds from sale of loans	28,514		30,425
Proceeds from sale of other assets	1,259		846
Net cash received from business acquisition	—		14,492

Net increase in loans and leases	(55,902)		(95,513)

Purchases of premises and equipment and other assets	(5,048)		(9,433)
Net cash (used in) provided by investing activities	(64,243)		11,115
Financing Activities

Net decrease in other short-term borrowings	(51,294)		(266,450)
Net increase in deposits	254,116		472,706
Repayments of other long-term debt	(190)		(183)
Repayments of capital lease obligation	(139)		(131)



Dividends paid	(12,764)		(12,367)

Purchase of treasury stock	(1,757)		(1,732)

Net cash provided by financing activities	187,972		191,843
Net increase in cash and cash equivalents	163,374		241,558
Cash and cash equivalents at January 1	146,993		154,244
Cash and cash equivalents at March 31	$	310,367	$	395,802

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 three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year of 2024. These interim financial statements should be read in conjunction with First Commonwealth’s 2023 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 was 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, the 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 January 31, 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
Non-owner 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 January 31, 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
Non-owner 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

Costs related to the acquisition totaled $9.1 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 Three Months Ended March 31,
	2024						2023
	Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount
	(dollars in thousands)
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains on securities arising during the period	$	(9,875)	$	2,074	$	(7,801)	$	10,355	$	(1,820)	$	8,535

Reclassification adjustment for losses on securities included in net income	—		—		—		—		—		—
Total unrealized (losses) gains on securities	(9,875)		2,074		(7,801)		10,355		(1,820)		8,535
Unrealized gains on derivatives:
Unrealized holding gains on derivatives arising during the period	583		(123)		460		5,806		(1,219)		4,587

Total unrealized gains on derivatives	583		(123)		460		5,806		(1,219)		4,587




Total other comprehensive (loss) income	$	(9,292)	$	1,951	$	(7,341)	$	16,161	$	(3,039)	$	13,122

The following table details the change in components of OCI for the three months ended March 31:


	2024								2023
	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	$	(92,340)	$	344	$	(19,760)	$	(111,756)	$	(107,471)	$	268	$	(30,489)	$	(137,692)


Other comprehensive (loss) income before reclassification adjustment	(7,801)		—		460		(7,341)		8,535		—		4,587		13,122
Amounts reclassified from accumulated other comprehensive (loss) income	—		—		—		—		—		—		—		—
Net other comprehensive (loss) income during the period	(7,801)		—		460		(7,341)		8,535		—		4,587		13,122
Balance at March 31	$	(100,141)	$	344	$	(19,300)	$	(119,097)	$	(98,936)	$	268	$	(25,902)	$	(124,570)

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 three months ended March 31:


	2024		2023
	(dollars in thousands)
Cash paid during the period for:
Interest	$	47,984	$	18,252
Income taxes	51		19
Non-cash investing and financing activities:

Loans transferred to other real estate owned and repossessed assets	1,252		536
Loans transferred from held to maturity to held for sale	22,476		28,714

Loans transferred from held for sale to held to maturity	(442)		(519)
Gross (decrease) increase in market value adjustment to securities available for sale	(9,875)		10,356
Gross increase in market value adjustment to derivatives	583		5,806

(Decrease) increase in limited partnership investment unfunded commitment	(422)		4,464
Noncash treasury stock reissuance	2,325		1,966
Net assets acquired through acquisition	—		69,778

Proceeds from death benefit on bank owned life insurance not received	318		103

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 March 31,
		2024		2023
Weighted average common shares issued		123,603,380		120,266,238
Average treasury stock shares		(21,425,781)		(20,498,898)
Average deferred compensation shares		(56,966)		(55,821)
Average unearned non-vested shares		(139,385)		(150,688)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share		101,981,248		99,560,831
Additional common stock equivalents (non-vested stock) used to calculate diluted earnings per share		160,353		163,133
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share		57,298		55,852

Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		102,198,899		99,779,816
Per Share Data:
Basic Earnings per Share		$	0.37	$	0.30
Diluted Earnings per Share		$	0.37	$	0.30

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 three months ended March 31, because to do so would have been antidilutive.


	2024					2023
		Price Range					Price Range
	Shares	From		To		Shares	From		To

Restricted Stock	79,467	$	13.24	$	16.43	139,476	$	12.77	$	16.43
Restricted Stock Units	29,042	$	15.29	$	15.29	17,667	$	17.53	$	17.53

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:


	March 31, 2024		December 31, 2023
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	2,423,326	$	2,517,905
Financial standby letters of credit	13,504		14,300
Performance standby letters of credit	16,762		17,194
Commercial letters of credit	555		555

The notional amounts outstanding as of March 31, 2024 include amounts issued in 2024 of $9 thousand in performance standby letters of credit and $0.2 million in financial standby letters of credit. There were no commercial letters of credit issued in 2024. A liability of $0.1 million has been recorded as of both March 31, 2024 and December 31, 2023, 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 $5.9 million and $7.3 million as of March 31, 2024 and December 31, 2023, 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 March 31, 2024, 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:


	March 31, 2024								December 31, 2023
	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	$	3,439	$	25	$	(183)	$	3,281	$	3,565	$	47	$	(147)	$	3,465
Mortgage-Backed Securities – Commercial	526,472		1,968		(54,239)		474,201		512,979		4,935		(52,521)		465,393
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	543,883		911		(70,590)		474,204		559,769		3,052		(68,222)		494,599

Other Government-Sponsored Enterprises	1,000		—		(87)		913		1,000		—		(85)		915
Obligations of States and Political Subdivisions	9,223		—		(1,048)		8,175		9,226		3		(1,027)		8,202
Corporate Securities	67,007		522		(4,592)		62,937		51,886		145		(3,619)		48,412



Total Securities Available for Sale	$	1,151,024	$	3,426	$	(130,739)	$	1,023,711	$	1,138,425	$	8,182	$	(125,621)	$	1,020,986

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 39 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 March 31, 2024, by contractual maturity, are shown below.


	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	255	$	255
Due after 1 but within 5 years	18,023		17,865
Due after 5 but within 10 years	58,952		53,905
Due after 10 years	—		—
	77,230		72,025
Mortgage-Backed Securities (a)	1,073,794		951,686
Total Debt Securities	$	1,151,024	$	1,023,711

(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 $529.9 million and a fair value of $477.5 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $543.9 million and a fair value of $474.2 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 three months ended March 31:


	2024		2023
	(dollars in thousands)
Proceeds from sales	$	—	$	30,686
Gross gains (losses) realized:
Sales transactions:
Gross gains	$	—	$	—
Gross losses	—		—
	—		—
Maturities
Gross gains	—		—
Gross losses	—		—

	—		—
Net gains	$	—	$	—

For the three months ended March 31, 2023, proceeds from sales included in the 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 $803.2 million and $386.5 million were pledged as of March 31, 2024 and December 31, 2023, 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:


	March 31, 2024								December 31, 2023
	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	$	1,685	$	—	$	(208)	$	1,477	$	1,781	$	—	$	(175)	$	1,606
Mortgage-Backed Securities- Commercial	123,075		72		(14,961)		108,186		69,502		—		(14,435)		55,067
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	289,247		—		(49,030)		240,217		296,432		—		(47,148)		249,284
Mortgage-Backed Securities – Commercial	1,523		—		(17)		1,506		2,190		—		(30)		2,160
Other Government-Sponsored Enterprises	22,624		—		(4,365)		18,259		22,543		—		(4,178)		18,365
Obligations of States and Political Subdivisions	25,554		—		(2,419)		23,135		25,561		—		(2,412)		23,149
Debt Securities Issued by Foreign Governments	1,000		—		(31)		969		1,000		—		(36)		964




Total Securities Held to Maturity	$	464,708	$	72	$	(71,031)	$	393,749	$	419,009	$	—	$	(68,414)	$	350,595

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2024, 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	$	660	$	656
Due after 1 but within 5 years	12,371		11,776
Due after 5 but within 10 years	35,584		29,483
Due after 10 years	563		448
	49,178		42,363
Mortgage-Backed Securities (a)	415,530		351,386
Total Debt Securities	$	464,708	$	393,749

(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 $124.8 million and a fair value of $109.7 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $290.8 million and a fair value of $241.7 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 $147.7 million and $98.1 million were pledged as of March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023, our FHLB stock totaled $19.2 million and $44.7 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 months ended March 31, 2024.

As of both March 31, 2024 and December 31, 2023, "Other investments" also includes $6.2 million in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the three-months ended March 31, 2024 and 2023, 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 March 31, 2024 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	$	—	$	—	$	3,208	$	(391)	$	3,208	$	(391)
Mortgage-Backed Securities – Commercial	22,591		(5)		290,862		(69,195)		313,453		(69,200)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	3,274		(33)		619,587		(119,587)		622,861		(119,620)
Mortgage-Backed Securities – Commercial	—		—		1,507		(17)		1,507		(17)
Other Government-Sponsored Enterprises	—		—		19,172		(4,452)		19,172		(4,452)
Obligations of States and Political Subdivisions	2,896		(23)		28,268		(3,444)		31,164		(3,467)
Debt Securities Issued by Foreign Governments	199		(1)		570		(30)		769		(31)
Corporate Securities	30,826		(1,261)		15,919		(3,331)		46,745		(4,592)



Total Securities	$	59,786	$	(1,323)	$	979,093	$	(200,447)	$	1,038,879	$	(201,770)

At March 31, 2024, 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 March 31, 2024, there are 218 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, 2023 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	$	—	$	—	$	3,395	$	(322)	$	3,395	$	(322)
Mortgage-Backed Securities - Commercial	—		—		300,642		(66,956)		300,642		(66,956)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	1,124		(3)		643,735		(115,367)		644,859		(115,370)
Mortgage-Backed Securities – Commercial	—		—		2,160		(30)		2,160		(30)
Other Government-Sponsored Enterprises	—		—		19,280		(4,263)		19,280		(4,263)
Obligation of States and Political Subdivisions	2,641		(62)		26,887		(3,377)		29,528		(3,439)
Debt Securities Issued by Foreign Governments	199		(1)		765		(35)		964		(36)
Corporate Securities	11,416		(45)		21,426		(3,574)		32,842		(3,619)

Total Securities	$	15,380	$	(111)	$	1,018,290	$	(193,924)	$	1,033,670	$	(194,035)

As of March 31, 2024, our corporate securities had an amortized cost and an estimated fair value of $67.0 million and $62.9 million, respectively. As of December 31, 2023, our corporate securities had an amortized cost and estimated fair value of $51.9 million and $48.4 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were thirteen and eight corporate securities, respectively, in an unrealized loss position as of March 31, 2024 and December 31, 2023. 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 three months ended March 31, 2024 and 2023.

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 $9.7 million and $8.2 million as of March 31, 2024 and December 31, 2023, respectively, and discounts on purchased loans from acquisitions were $23.9 million and $25.7 million as of March 31, 2024 and December 31, 2023, respectively. The following table provides outstanding balances related to each of our loan types:


	March 31, 2024		December 31, 2023

	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,593,836	$	1,543,349
Time and demand	1,191,136		1,187,300

Commercial credit cards	12,995		12,906
Equipment finance	279,938		232,944
Time and demand other	109,767		110,199
Real estate construction	559,367		597,735
Construction other	520,320		541,633
Construction residential	39,047		56,102
Residential real estate	2,402,272		2,416,876
Residential first lien	1,727,590		1,739,107
Residential junior lien/home equity	674,682		677,769
Commercial real estate	3,090,950		3,053,152
Multifamily	575,827		551,142
Non-owner occupied	1,789,521		1,772,785
Owner occupied	725,602		729,225
Loans to individuals	1,353,445		1,357,649
Automobile and recreational vehicles	1,277,212		1,277,969
Consumer credit cards	9,464		10,291
Consumer other	66,769		69,389
Total loans and leases	$	8,999,870	$	8,968,761

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.

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.

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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Non-owner 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 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 3.79% and during the one-year forecast period it was projected to average 4.61%, with a peak of 4.87%.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The following tables represent our credit risk profile by creditworthiness:


	March 31, 2024
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,495,882	$	67,634	$	30,320	$	—	$	—	$	97,954	$	1,593,836
Time and demand	1,094,746		67,044		29,346		—		—		96,390		1,191,136
Commercial credit cards	12,995		—		—		—		—		—		12,995
Equipment finance	278,374		590		974		—		—		1,564		279,938
Time and demand other	109,767		—		—		—		—		—		109,767
Real estate construction	547,230		—		12,137		—		—		12,137		559,367
Construction other	508,183		—		12,137		—		—		12,137		520,320
Construction residential	39,047		—		—		—		—		—		39,047
Residential real estate	2,391,848		1,121		9,303		—		—		10,424		2,402,272
Residential first lien	1,722,002		776		4,812		—		—		5,588		1,727,590
Residential junior lien/home equity	669,846		345		4,491		—		—		4,836		674,682
Commercial real estate	2,999,754		53,818		37,378		—		—		91,196		3,090,950
Multifamily	563,640		12,110		77		—		—		12,187		575,827
Non-owner occupied	1,746,310		23,915		19,296		—		—		43,211		1,789,521
Owner occupied	689,804		17,793		18,005		—		—		35,798		725,602
Loans to individuals	1,353,299		—		146		—		—		146		1,353,445
Automobile and recreational vehicles	1,277,068		—		144		—		—		144		1,277,212
Consumer credit cards	9,464		—		—		—		—		—		9,464
Consumer other	66,767		—		2		—		—		2		66,769
Total loans and leases	$	8,788,013	$	122,573	$	89,284	$	—	$	—	$	211,857	$	8,999,870

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2023
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,453,970	$	58,325	$	31,054	$	—	$	—	$	89,379	$	1,543,349
Time and demand	1,098,763		58,325		30,212		—		—		88,537		1,187,300
Commercial credit cards	12,906		—		—		—		—		—		12,906
Equipment finance	232,102		—		842		—		—		842		232,944
Time and demand other	110,199		—		—		—		—		—		110,199
Real estate construction	585,543		—		12,192		—		—		12,192		597,735
Construction other	529,441		—		12,192		—		—		12,192		541,633
Construction residential	56,102		—		—		—		—		—		56,102
Residential real estate	2,405,240		2,768		8,868		—		—		11,636		2,416,876
Residential first lien	1,732,006		2,415		4,686		—		—		7,101		1,739,107
Residential junior lien/home equity	673,234		353		4,182		—		—		4,535		677,769
Commercial real estate	2,956,338		62,038		34,776		—		—		96,814		3,053,152
Multifamily	538,939		12,117		86		—		—		12,203		551,142
Non-owner occupied	1,722,315		31,652		18,818		—		—		50,470		1,772,785
Owner occupied	695,084		18,269		15,872		—		—		34,141		729,225
Loans to individuals	1,357,483		—		166		—		—		166		1,357,649
Automobile and recreational vehicles	1,277,805		—		164		—		—		164		1,277,969
Consumer credit cards	10,291		—		—		—		—		—		10,291
Consumer other	69,387		—		2		—		—		2		69,389
Total loans and leases	$	8,758,574	$	123,131	$	87,056	$	—	$	—	$	210,187	$	8,968,761

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


	March 31, 2024
	Term Loans												Revolving Loans
	2024		2023		2022		2021		2020		Prior				Total
	(dollars in thousands)
Time and demand	$	46,154	$	168,486	$	163,622	$	101,412	$	69,364	$	93,319	$	548,779	$	1,191,136
Pass	46,154		164,991		159,608		80,503		66,737		76,744		500,009		1,094,746
OAEM	—		1,628		3,273		13,338		1,382		11,554		35,869		67,044
Substandard	—		1,867		741		7,571		1,245		5,021		12,901		29,346
Gross charge-offs	—		—		—		—		(49)		(1,414)		(302)		(1,765)
Gross recoveries	—		—		—		—		174		155		18		347
Commercial credit cards	—		—		—		—		—		—		12,995		12,995
Pass	—		—		—		—		—		—		12,995		12,995


Gross charge-offs	—		—		—		—		—		—		(44)		(44)
Gross recoveries	—		—		—		—		—		—		—		—

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2024
	Term Loans						Revolving Loans
	2024	2023	2022	2021	2020	Prior		Total
	(dollars in thousands)
Equipment finance	61,316	161,360	57,262	—	—	—	—	279,938
Pass	61,316	160,422	56,636	—	—	—	—	278,374
OAEM	—	344	246	—	—	—	—	590
Substandard	—	594	380	—	—	—	—	974
Gross charge-offs	—	(198)	(153)	—	—	—	—	(351)
Gross recoveries	—	—	15	—	—	—	—	15
Time and demand other	2,070	10,294	5,752	17,536	19,335	48,548	6,232	109,767
Pass	2,070	10,294	5,752	17,536	19,335	48,548	6,232	109,767


Gross charge-offs	—	—	—	—	—	—	(502)	(502)
Gross recoveries	—	—	—	—	—	—	58	58
Construction other	762	117,687	215,866	117,447	37,916	29,943	699	520,320
Pass	762	117,687	212,578	115,936	37,916	22,605	699	508,183

Substandard	—	—	3,288	1,511	—	7,338	—	12,137
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	6	—	6
Construction residential	—	25,982	10,930	1,628	—	29	478	39,047
Pass	—	25,982	10,930	1,628	—	29	478	39,047


Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	12,388	123,144	387,725	515,732	316,062	370,776	1,763	1,727,590
Pass	12,388	122,863	387,095	514,947	315,719	367,304	1,686	1,722,002
OAEM	—	—	—	—	—	699	77	776
Substandard	—	281	630	785	343	2,773	—	4,812
Gross charge-offs	—	(3)	(1)	(20)	—	(4)	—	(28)
Gross recoveries	—	—	—	—	—	43	—	43
Residential junior lien/home equity	5,413	60,252	69,654	42,613	2,528	6,814	487,408	674,682
Pass	5,413	60,241	69,502	42,613	2,528	6,550	482,999	669,846
OAEM	—	—	—	—	—	199	146	345
Substandard	—	11	152	—	—	65	4,263	4,491
Gross charge-offs	—	—	(1)	—	—	—	(51)	(52)
Gross recoveries	—	—	—	—	—	9	7	16
Multifamily	7,562	6,986	164,545	152,469	104,345	139,071	849	575,827
Pass	7,562	6,986	152,877	152,469	104,345	138,552	849	563,640
OAEM	—	—	11,668	—	—	442	—	12,110
Substandard	—	—	—	—	—	77	—	77
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Non-owner occupied	3,115	190,694	449,134	164,799	153,824	815,050	12,905	1,789,521
Pass	3,115	187,694	448,754	164,799	150,882	778,227	12,839	1,746,310
OAEM	—	—	209	—	2,942	20,764	—	23,915
Substandard	—	3,000	171	—	—	16,059	66	19,296
Gross charge-offs	—	—	(50)	—	—	(233)	—	(283)
Gross recoveries	—	—	—	—	—	44	—	44

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2024
	Term Loans												Revolving Loans
	2024		2023		2022		2021		2020		Prior				Total
	(dollars in thousands)
Owner occupied	17,026		106,022		160,114		154,021		71,247		204,337		12,835		725,602
Pass	17,026		105,773		156,340		149,483		65,978		182,547		12,657		689,804
OAEM	—		113		687		4,268		3,629		9,024		72		17,793
Substandard	—		136		3,087		270		1,640		12,766		106		18,005
Gross charge-offs	—		—		—		—		—		—		—		—
Gross recoveries	—		—		—		—		—		29		41		70
Automobile and recreational vehicles	101,789		403,027		424,098		212,541		103,467		32,290		—		1,277,212
Pass	101,789		403,027		424,098		212,484		103,459		32,211		—		1,277,068

Substandard	—		—		—		57		8		79		—		144
Gross charge-offs	—		(303)		(965)		(290)		(167)		(217)		—		(1,942)
Gross recoveries	—		104		132		169		43		105		—		553
Consumer credit cards	—		—		—		—		—		—		9,464		9,464
Pass	—		—		—		—		—		—		9,464		9,464


Gross charge-offs	—		—		—		—		—		—		(150)		(150)
Gross recoveries	—		—		—		—		—		—		18		18
Consumer other	2,050		6,281		3,796		12,543		1,192		3,645		37,262		66,769
Pass	2,050		6,281		3,796		12,543		1,192		3,645		37,260		66,767

Substandard	—		—		—		—		—		—		2		2
Gross charge-offs	—		—		(36)		(45)		(11)		(21)		(333)		(446)
Gross recoveries	—		—		9		1		1		35		45		91
Total loans and leases	$	259,645	$	1,380,215	$	2,112,498	$	1,492,741	$	879,280	$	1,743,822	$	1,131,669	$	8,999,870
Total charge-offs	$	—	$	(504)	$	(1,206)	$	(355)	$	(227)	$	(1,889)	$	(1,382)	$	(5,563)
Total recoveries	$	—	$	104	$	156	$	170	$	218	$	426	$	187	$	1,261


	December 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Time and demand	$	170,285	$	178,568	$	111,288	$	73,487	$	42,502	$	65,419	$	545,751	$	1,187,300
Pass	166,716		174,699		100,779		71,125		29,812		57,660		497,972		1,098,763
OAEM	1,707		3,129		2,948		1,530		10,873		2,553		35,585		58,325
Substandard	1,862		740		7,561		832		1,817		5,206		12,194		30,212
Gross charge-offs	(582)		(4,572)		(18)		(2,195)		(2,364)		(1,283)		(5,133)		(16,147)
Gross recoveries	—		—		—		119		4		128		9		260
Commercial credit cards	—		—		—		—		—		—		12,906		12,906
Pass	—		—		—		—		—		—		12,906		12,906


Gross charge-offs	—		—		—		—		—		—		(105)		(105)
Gross recoveries	—		—		—		—		—		—		13		13
Equipment finance	170,630		62,314		—		—		—		—		—		232,944
Pass	170,302		61,800		—		—		—		—		—		232,102

Substandard	328		514		—		—		—		—		—		842
Gross charge-offs	(104)		(433)		—		—		—		—		—		(537)
Gross recoveries	—		—		—		—		—		—		—		—
Time and demand other	9,965		6,022		17,860		19,352		3,025		46,466		7,509		110,199
Pass	9,965		6,022		17,860		19,352		3,025		46,466		7,509		110,199


Gross charge-offs	—		—		—		—		—		—		(2,410)		(2,410)
Gross recoveries	—		—		—		—		—		—		225		225

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2023
	Term Loans						Revolving Loans
	2023	2022	2021	2020	2019	Prior		Total
	(dollars in thousands)
Construction other	94,150	217,565	154,873	44,428	5,379	24,541	697	541,633
Pass	94,150	214,277	153,195	44,428	5,379	17,315	697	529,441

Substandard	—	3,288	1,678	—	—	7,226	—	12,192
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Construction residential	27,487	19,322	2,284	3,194	3,337	—	478	56,102
Pass	27,487	19,322	2,284	3,194	3,337	—	478	56,102


Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	120,053	385,917	527,057	320,107	97,529	286,503	1,941	1,739,107
Pass	119,903	385,269	524,841	319,762	96,702	283,665	1,864	1,732,006
OAEM	—	80	1,527	—	—	731	77	2,415
Substandard	150	568	689	345	827	2,107	—	4,686
Gross charge-offs	—	(98)	—	(31)	(1)	(116)	—	(246)
Gross recoveries	—	—	—	—	—	177	—	177
Residential junior lien/home equity	62,098	70,171	44,359	2,487	2,305	4,949	491,400	677,769
Pass	62,098	70,171	44,359	2,487	2,305	4,672	487,142	673,234
OAEM	—	—	—	—	—	208	145	353
Substandard	—	—	—	—	—	69	4,113	4,182
Gross charge-offs	—	—	—	—	—	—	(315)	(315)
Gross recoveries	—	—	—	—	—	—	70	70
Multifamily	6,839	156,393	155,067	94,284	44,121	92,585	1,853	551,142
Pass	6,839	144,728	155,067	94,284	44,121	92,047	1,853	538,939
OAEM	—	11,665	—	—	—	452	—	12,117
Substandard	—	—	—	—	—	86	—	86
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Non-owner occupied	184,562	423,543	159,593	148,716	221,551	621,678	13,142	1,772,785
Pass	181,578	415,577	159,593	148,716	211,019	592,755	13,077	1,722,315
OAEM	—	7,546	—	—	7,313	16,793	—	31,652
Substandard	2,984	420	—	—	3,219	12,130	65	18,818
Gross charge-offs	—	(232)	—	—	—	(4,473)	—	(4,705)
Gross recoveries	—	—	—	—	—	127	—	127
Owner occupied	106,831	163,830	153,996	80,522	59,357	152,728	11,961	729,225
Pass	106,583	161,071	149,788	75,267	42,745	147,809	11,821	695,084
OAEM	112	785	3,950	4,000	5,363	4,026	33	18,269
Substandard	136	1,974	258	1,255	11,249	893	107	15,872
Gross charge-offs	—	—	(32)	—	—	(1,540)	—	(1,572)
Gross recoveries	—	—	—	—	—	24	—	24
Automobile and recreational vehicles	427,112	459,836	234,144	115,364	35,402	6,111	—	1,277,969
Pass	427,112	459,835	234,085	115,354	35,345	6,074	—	1,277,805

Substandard	—	1	59	10	57	37	—	164
Gross charge-offs	(487)	(2,232)	(1,258)	(972)	(527)	(111)	—	(5,587)
Gross recoveries	71	479	419	367	347	149	—	1,832
Consumer credit cards	—	—	—	—	—	—	10,291	10,291
Pass	—	—	—	—	—	—	10,291	10,291


Gross charge-offs	—	—	—	—	—	—	(290)	(290)
Gross recoveries	—	—	—	—	—	—	87	87

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Consumer other	6,893		4,224		13,277		1,411		1,090		3,440		39,054		69,389
Pass	6,893		4,224		13,277		1,411		1,090		3,440		39,052		69,387

Substandard	—		—		—		—		—		—		2		2
Gross charge-offs	(21)		(50)		(130)		(31)		(157)		(23)		(941)		(1,353)
Gross recoveries	—		1		4		9		35		66		185		300
Total loans and leases	$	1,386,905	$	2,147,705	$	1,573,798	$	903,352	$	515,598	$	1,304,420	$	1,136,983	$	8,968,761
Total charge-offs	$	(1,194)	$	(7,617)	$	(1,438)	$	(3,229)	$	(3,049)	$	(7,546)	$	(9,194)	$	(33,267)
Total recoveries	$	71	$	480	$	423	$	495	$	386	$	671	$	589	$	3,115

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 three months ended March 31, 2024 and 2023 were $4.3 million and $1.2 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 March 31, 2024 and December 31, 2023. 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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2024
	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	$	8,516	$	379	$	175	$	9,757	$	18,827	$	1,575,009	$	1,593,836
Time and demand	8,013		225		142		9,023		17,403		1,173,733		1,191,136
Commercial credit cards	42		7		—		—		49		12,946		12,995
Equipment finance	460		147		—		734		1,341		278,597		279,938
Time and demand other	1		—		33		—		34		109,733		109,767
Real estate construction	1,070		—		—		3,288		4,358		555,009		559,367
Construction other	1,070		—		—		3,288		4,358		515,962		520,320
Construction residential	—		—		—		—		—		39,047		39,047
Residential real estate	5,795		1,762		779		9,019		17,355		2,384,917		2,402,272
Residential first lien	3,080		1,311		276		4,579		9,246		1,718,344		1,727,590
Residential junior lien/home equity	2,715		451		503		4,440		8,109		666,573		674,682
Commercial real estate	9,310		—		—		20,236		29,546		3,061,404		3,090,950
Multifamily	—		—		—		51		51		575,776		575,827
Non-owner occupied	8,584		—		—		15,131		23,715		1,765,806		1,789,521
Owner occupied	726		—		—		5,054		5,780		719,822		725,602
Loans to individuals	4,275		920		745		146		6,086		1,347,359		1,353,445
Automobile and recreational vehicles	3,862		568		22		144		4,596		1,272,616		1,277,212
Consumer credit cards	15		44		—		—		59		9,405		9,464
Consumer other	398		308		723		2		1,431		65,338		66,769
Total loans and leases	$	28,966	$	3,061	$	1,699	$	42,446	$	76,172	$	8,923,698	$	8,999,870

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 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	$	1,206	$	745	$	4,187	$	10,060	$	16,198	$	1,527,151	$	1,543,349
Time and demand	565		691		4,187		9,218		14,661		1,172,639		1,187,300
Commercial credit cards	7		54		—		—		61		12,845		12,906
Equipment finance	600		—		—		842		1,442		231,502		232,944
Time and demand other	34		—		—		—		34		110,165		110,199
Real estate construction	—		—		—		3,288		3,288		594,447		597,735
Construction other	—		—		—		3,288		3,288		538,345		541,633
Construction residential	—		—		—		—		—		56,102		56,102
Residential real estate	6,982		1,535		1,062		8,573		18,152		2,398,724		2,416,876
Residential first lien	4,130		940		171		4,443		9,684		1,729,423		1,739,107
Residential junior lien/home equity	2,852		595		891		4,130		8,468		669,301		677,769
Commercial real estate	4,157		—		3,509		17,385		25,051		3,028,101		3,053,152
Multifamily	—		—		—		55		55		551,087		551,142
Non-owner occupied	2,303		—		3,509		14,282		20,094		1,752,691		1,772,785
Owner occupied	1,854		—		—		3,048		4,902		724,323		729,225
Loans to individuals	4,613		878		678		166		6,335		1,351,314		1,357,649
Automobile and recreational vehicles	4,115		612		151		164		5,042		1,272,927		1,277,969
Consumer credit cards	39		71		—		—		110		10,181		10,291
Consumer other	459		195		527		2		1,183		68,206		69,389
Total loans and leases	$	16,958	$	3,158	$	9,436	$	39,472	$	69,024	$	8,899,737	$	8,968,761

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 most consumer loans, which are placed on nonaccrual status at 150 days past due. Consumer loans related to automobile and recreational vehicles are either charged off or repossessed at no later than 90 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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 March 31, 2024 and December 31, 2023, there were no nonperforming loans held for sale. During both the three months ended March 31, 2024 and 2023, 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 March 31, 2024 and December 31, 2023. 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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2024						December 31, 2023
	Recorded investment		Unpaid principal balance		Related specific allowance		Recorded investment		Unpaid principal balance		Related specific allowance
	(dollars in thousands)
With no related specific allowance recorded:
Commercial, financial, agricultural and other	$	3,314	$	16,606			$	4,369	$	18,014
Time and demand	2,580		15,872				3,527		17,172

Equipment finance	734		734				842		842
Time and demand other	—		—				—		—
Real estate construction	3,288		3,288				3,288		3,288
Construction other	3,288		3,288				3,288		3,288
Construction residential	—		—				—		—
Residential real estate	7,488		9,231				7,042		8,763
Residential first lien	4,296		5,309				4,161		5,151
Residential junior lien/home equity	3,192		3,922				2,881		3,612
Commercial real estate	4,649		4,538				12,402		18,219
Multifamily	51		55				55		58
Non-owner occupied	2,080		2,296				10,971		17,092
Owner occupied	2,518		2,187				1,376		1,069
Loans to individuals	146		188				166		259
Automobile and recreational vehicles	144		185				164		257

Consumer other	2		3				2		2
Subtotal	18,885		33,851				27,267		48,543
With a specific allowance recorded:
Commercial, financial, agricultural and other	6,443		7,467		$	3,252	5,691		6,787		$	4,044
Time and demand	6,443		7,467		3,252		5,691		6,787		4,044

Equipment finance	—		—		—		—		—		—
Time and demand other	—		—		—		—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—		—		—		—
Construction residential	—		—		—		—		—		—
Residential real estate	1,531		1,697		166		1,531		1,697		118
Residential first lien	283		279		61		282		279		39
Residential junior lien/home equity	1,248		1,418		105		1,249		1,418		79
Commercial real estate	15,587		16,545		1,956		4,983		5,294		387
Multifamily	—		—		—		—		—		—
Non-owner occupied	13,051		13,862		1,537		3,311		3,550		174
Owner occupied	2,536		2,683		419		1,672		1,744		213
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—

Consumer other	—		—		—		—		—		—
Subtotal	23,561		25,709		5,374		12,205		13,778		4,549
Total	$	42,446	$	59,560	$	5,374	$	39,472	$	62,321	$	4,549

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 March 31,
	2024				2023

	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related specific allowance recorded:
Commercial, financial, agricultural and other	$	3,499	$	—	$	1,693	$	—
Time and demand	2,731		—		1,455		—

Equipment finance	768		—		238		—
Time and demand other	—		—		—		—
Real estate construction	3,288		—		—		—
Construction other	3,288		—		—		—
Construction residential	—		—		—		—
Residential real estate	7,436		7		6,069		20
Residential first lien	4,279		7		3,437		20
Residential junior lien/home equity	3,157		—		2,632		—
Commercial real estate	6,252		34		21,974		—
Multifamily	52		—		—		—
Non-owner occupied	4,061		1		20,487		—
Owner occupied	2,139		33		1,487		—
Loans to individuals	153		1		432		—
Automobile and recreational vehicles	151		1		356		—

Consumer other	2		—		76		—
Subtotal	20,628		42		30,168		20
With a specific allowance recorded:
Commercial, financial, agricultural and other	5,200		—		7,445		—
Time and demand	5,200		—		7,445		—

Equipment finance	—		—		—		—
Time and demand other	—		—		—		—
Real estate construction	—		—		—		—
Construction other	—		—		—		—
Construction residential	—		—		—		—
Residential real estate	1,531		—		824		—
Residential first lien	282		—		—		—
Residential junior lien/home equity	1,249		—		824		—
Commercial real estate	9,528		—		711		—
Multifamily	—		—		—		—
Non-owner occupied	7,734		—		115		—
Owner occupied	1,794		—		596		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—

Consumer other	—		—		—		—
Subtotal	16,259		—		8,980		—
Total	$	36,887	$	42	$	39,148	$	20

Unfunded commitments related to nonperforming loans were $0.2 million and $0.1 million at March 31, 2024 and December 31, 2023, respectively. After consideration of the requirements to draw and available collateral related to these

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

commitments, it was determined that no reserve was required for these commitments at March 31, 2024 and December 31, 2023.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

In accordance with ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal forgiveness, other-than-insignificant payment delay, term extensions or any combination thereof. When calculating the allowance for credit losses, these modifications are included in their respective loan segment and an allowance is determined by a loss given default and probability of default methodology.

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


	For the Three Months Ended March 31, 2024
	Rate Reduction		Term Extension		Principal Forgiveness		Term Extension and Payment Deferral		Rate Reduction, Term Extension and Payment Deferral		Rate Reduction and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)
Commercial, financial, agricultural and other	$	199	$	869	$	—	$	68	$	—	$	103	$	1,239	0.08	%
Time and demand	199		869		—		—		—		—		1,068		0.09

Equipment finance	—		—		—		68		—		103		171		0.06




Residential real estate	—		90		—		197		—		—		287		0.01
Residential first lien	—		90		—		167		—		—		257		0.01
Residential junior lien/home equity	—		—		—		30		—		—		30		—
Commercial real estate	—		—		—		152		—		—		152		—


Owner occupied	—		—		—		152		—		—		152		0.02
Loans to individuals	—		12		—		10		15		—		37		—
Automobile and recreational vehicles	—		12		—		10		15		—		37		—


Total	$	199	$	971	$	—	$	427	$	15	$	103	$	1,715	0.02	%


	For the Three Months Ended March 31, 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	$	25	$	—	$	—	$	—	$	25	—	%
Residential first lien	25		—		—		—		25		—









Total	$	25	$	—	$	—	$	—	$	25	—	%

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	For the Three Months Ended March 31, 2024
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)
Commercial, financial, agricultural and other	1.77	%	1.3	$	—	0.4
Time and demand	1.50		1.3	—		0.0

Equipment finance	2.30		0.5	—		0.4




Residential real estate	—		6.1	—		0.8
Residential first lien	—		5.6	—		0.9
Residential junior lien/home equity	—		10.3	—		0.3
Commercial real estate	—		0.5	—		0.5


Owner occupied	—		0.5	—		0.5
Loans to individuals	2.39		2.6	—		0.4
Automobile and recreational vehicles	2.39		2.6	—		0.4


Total	1.80	%	2.2	$	—	0.6


	For the Three Months Ended March 31, 2023
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)








Residential real estate	2.25	%	0.0	$	—	0.0
Residential first lien	2.25		0.0	—		0.0









Total	2.25	%	0.0	$	—	0.0

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 three months ended March 31, 2024, 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:


	March 31, 2024
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,288	$	—	$	—	$	—	$	1,288
Time and demand	1,117		—		—		—		1,117

Equipment finance	171		—		—		—		171




Residential real estate	1,017		—		—		—		1,017
Residential first lien	987		—		—		—		987
Residential junior lien/home equity	30		—		—		—		30
Commercial real estate	9,823		—		—		—		9,823


Owner occupied	9,823		—		—		—		9,823
Loans to individuals	37		—		—		—		37
Automobile and recreational vehicles	37		—		—		—		37


Total loans and leases	$	12,165	$	—	$	—	$	—	$	12,165


	December 31, 2023
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	50	$	—	$	—	$	—	$	50
Time and demand	50		—		—		—		50






Residential real estate	758		—		—		—		758
Residential first lien	758		—		—		—		758

Commercial real estate	9,663		—		—		—		9,663


Owner occupied	9,663		—		—		—		9,663




Total loans and leases	$	10,471	$	—	$	—	$	—	$	10,471

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 Three Months Ended March 31, 2024
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	27,996	$	(2,662)	$	420	$	1,292	$	27,046
Time and demand	22,819		(1,765)		347		(565)		20,836
Commercial credit cards	278		(44)		—		71		305
Equipment finance	3,399		(351)		15		1,263		4,326
Time and demand other	1,500		(502)		58		523		1,579
Real estate construction	7,418		—		6		(875)		6,549
Construction other	6,448		—		6		(653)		5,801
Construction residential	970		—		—		(222)		748
Residential real estate	23,901		(80)		59		13		23,893
Residential first lien	16,975		(28)		43		(107)		16,883
Residential junior lien/home equity	6,926		(52)		16		120		7,010
Commercial real estate	37,071		(283)		114		2,201		39,103
Multifamily	5,233		—		—		(8)		5,225
Non-owner occupied	19,995		(283)		44		2,308		22,064
Owner occupied	11,843		—		70		(99)		11,814
Loans to individuals	21,332		(2,538)		662		3,051		22,507
Automobile and recreational vehicles	19,142		(1,942)		553		2,490		20,243
Consumer credit cards	372		(150)		18		107		347
Consumer other	1,818		(446)		91		454		1,917
Total loans and leases	$	117,718	$	(5,563)	$	1,261	$	5,682	$	119,098

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 March 31, 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	$	15,949	$	(663)	$	159	$	4,473	$	42,568
Time and demand	20,040		15,949		(255)		116		3,615		39,465
Commercial credit cards	335		—		(26)		2		20		331
Equipment finance	1,086		—		(45)		—		420		1,461
Time and demand other	1,189		—		(337)		41		418		1,311
Real estate construction	8,822		287		—		—		(1,160)		7,949
Construction other	6,360		227		—		—		(696)		5,891
Construction residential	2,462		60		—		—		(464)		2,058
Residential real estate	21,412		527		(79)		38		875		22,773
Residential first lien	14,822		197		(16)		26		795		15,824
Residential junior lien/home equity	6,590		330		(63)		12		80		6,949
Commercial real estate	28,804		5,313		—		42		5,218		39,377
Multifamily	4,726		234		—		—		581		5,541
Non-owner occupied	16,426		2,739		—		38		2,349		21,552
Owner occupied	7,652		2,340		—		4		2,288		12,284
Loans to individuals	21,218		3		(1,141)		471		667		21,218
Automobile and recreational vehicles	18,819		3		(802)		390		603		19,013
Consumer credit cards	412		—		(66)		17		5		368
Consumer other	1,987		—		(273)		64		59		1,837
Total loans and leases	$	102,906	$	22,079	$	(1,883)	$	710	$	10,073	$	133,885

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.

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.


						March 31, 2024			December 31, 2023
Balance sheet:
Operating lease asset classified as premises and equipment	$	42,068	$	45,005
Operating lease liability classified as other liabilities	46,575		49,327

					For the Three Months Ended
						March 31, 2024			March 31, 2023
Income statement:
Operating lease cost classified as occupancy and equipment expense						$	1,472		$	1,494

Weighted average lease term, in years						13.27			13.59
Weighted average discount rate						3.60		%	3.54		%
Operating cash flows						$	1,468		$	12,478

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 March 31, 2024 were as follows (dollars in thousands):


For the twelve months ended:
March 31, 2025	$	5,768
March 31, 2026	5,386
March 31, 2027	4,803
March 31, 2028	4,357
March 31, 2029	4,285
Thereafter	35,096
Total future minimum lease payments	59,695
Less remaining imputed interest	13,120
Operating lease liability	$	46,575

Note 10 Income Taxes

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at March 31, 2024 and December 31, 2023, 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, 2020 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 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).

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)

March 31, 2024

Other Investments

6,182

Carrying Value

N/A

Limited Partnership Investments

28,445

Par Value

N/A

December 31, 2023

Other Investments

6,182

Carrying Value

N/A

Limited Partnership Investments

27,137

Par Value

N/A

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	March 31, 2024
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,281	$	—	$	3,281
Mortgage-Backed Securities - Commercial	—		474,201		—		474,201
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		474,204		—		474,204

Other Government-Sponsored Enterprises	—		913		—		913
Obligations of States and Political Subdivisions	—		8,175		—		8,175
Corporate Securities	—		62,937		—		62,937



Total Securities Available for Sale	—		1,023,711		—		1,023,711
Other Investments	—		19,215		6,182		25,397
Loans Held for Sale	—		31,895		—		31,895

Other Assets(a)	—		49,089		28,445		77,534
Total Assets	$	—	$	1,123,910	$	34,627	$	1,158,537
Other Liabilities(a)	$	—	$	73,790	$	—	$	73,790
Total Liabilities	$	—	$	73,790	$	—	$	73,790

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


	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,465	$	—	$	3,465
Mortgage-Backed Securities - Commercial	—		465,393		—		465,393
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		494,599		—		494,599

Other Government-Sponsored Enterprises	—		915		—		915
Obligations of States and Political Subdivisions	—		8,202		—		8,202
Corporate Securities	—		48,412		—		48,412



Total Securities Available for Sale	—		1,020,986		—		1,020,986
Other Investments	—		44,689		6,182		50,871
Loans Held for Sale	—		29,820		—		29,820

Other Assets(a)	—		32,668		27,137		59,805
Total Assets	$	—	$	1,128,163	$	33,319	$	1,161,482
Other Liabilities(a)	$	—	$	58,167	$	—	$	58,167
Total Liabilities	$	—	$	58,167	$	—	$	58,167

(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)

For the three months ended March 31, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	2024
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	6,182	$	27,137	$	33,319
Total gains or losses
Included in earnings	—		(6)		(6)
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		1,509		1,509
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(195)		(195)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	6,182	$	28,445	$	34,627


	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		6,882		11,882
Issuances	—		—		—
Sales	—		—		—
Settlements	—		(151)		(151)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	6,170	$	24,422	$	30,592

During the three months ended March 31, 2024 and 2023, 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 March 31, 2024 and 2023.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	March 31, 2024
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Nonperforming loans	$	—	$	27,025	$	10,047	$	37,072
Other real estate owned	—		562		—		562
Total Assets	$	—	$	27,587	$	10,047	$	37,634


	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Nonperforming loans	$	—	$	25,215	$	9,708	$	34,923
Other real estate owned	—		609		—		609
Total Assets	$	—	$	25,824	$	9,708	$	35,532

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


	For the Three Months Ended March 31,
		2024		2023
		(dollars in thousands)
Nonperforming loans		$	(2,393)	$	230
Other real estate owned		(50)		—
Total losses		$	(2,443)	$	230

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 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 that is 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 that is determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of $0.4 million as of March 31, 2024 and primarily consists of 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 three months ended March 31, 2024.

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 March 31, 2024 and December 31, 2023. 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 is 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.

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.

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 carrying amounts and fair values of First Commonwealth’s financial instruments:


	March 31, 2024
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	77,179	$	77,179	$	77,179	$	—	$	—
Interest-bearing deposits	233,188		233,188		233,188		—		—
Securities available for sale	1,023,711		1,023,711		—		1,023,711		—
Securities held to maturity	464,708		393,749		—		393,749		—
Other investments	25,397		25,397		—		19,215		6,182
Loans held for sale	31,895		31,895		—		31,895		—
Loans and leases	8,999,870		8,907,184		—		27,025		8,880,159
Financial liabilities
Deposits	9,446,403		9,440,446		—		9,440,446		—
Short-term borrowings	546,541		540,267		—		540,267		—
Subordinated debt	177,803		156,341		—		—		156,341
Long-term debt	3,932		3,832		—		3,832		—
Capital lease obligation	4,755		4,755		—		4,755		—


	December 31, 2023
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	125,436	$	125,436	$	125,436	$	—	$	—
Interest-bearing deposits	21,557		21,557		21,557		—		—
Securities available for sale	1,020,986		1,020,986		—		1,020,986		—
Securities held to maturity	419,009		350,595		—		350,595		—
Other investments	50,871		50,871		—		44,689		6,182
Loans held for sale	29,820		29,820		—		29,820		—
Loans and leases	8,968,761		8,860,736		—		25,215		8,835,521
Financial liabilities
Deposits	9,192,309		9,187,655		—		9,187,655		—
Short-term borrowings	597,835		594,670		—		594,670		—
Subordinated debt	177,741		151,525		—		—		151,525
Long-term debt	4,122		4,041		—		4,041		—
Capital lease obligation	4,894		4,894		—		4,894		—

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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 21 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 following table provides the notional amount of interest rate swap contracts and their maturity date.


Notional Amount						Maturity Date
(dollars in thousands)
$25,000						06/30/24
50,000						12/01/24
150,000						05/01/25
25,000						08/25/25
25,000						10/10/25
50,000						11/05/25
150,000						05/01/26
25,000						10/15/26
$500,000

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 months ended March 31, 2024, there was a negative impact of $5.6 million 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 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 March 31, 2024, 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 months ended March 31, 2024 was an increase of $0.3 million.

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 March 31, 2024, the underlying funded mortgage loan commitments had a carrying value of $6.1 million and a fair value of $7.3 million, while the underlying unfunded mortgage loan commitments had a notional amount of $67.7 million. At December 31, 2023, the underlying funded mortgage loan commitments had a carrying value of $7.1 million and a fair value of $8.1 million, while the underlying unfunded mortgage loan commitments had a notional amount of $38.2 million. The interest rate lock commitments increased other noninterest income by $0.2 million for the three months ended March 31, 2024.

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:


	March 31, 2024		December 31, 2023
	(dollars in thousands)
Derivatives not Designated as Hedging Instruments
Credit value adjustment	$	(1)	$	(13)
Notional amount:
Interest rate derivatives	942,491		945,046
Interest rate caps	37,547		37,647
Interest rate collars	524		35,878
Risk participation agreements	180,388		206,325
Sold credit protection on risk participation agreements	(152,857)		(121,265)
Interest rate options	67,674		38,155
Derivatives Designated as Hedging Instruments
Interest rate swaps:
Fair value adjustment	(24,551)		(25,133)
Notional amount	570,000		570,000
Interest rate forwards:
Fair value adjustment	(150)		(352)
Notional amount	71,000		39,000

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 March 31,
			2024		2023
		(dollars in thousands)
Non-hedging interest rate derivatives
Increase in other income			$	283	$	239

Hedging interest rate derivatives
(Decrease) increase in interest and fees on loans			(6,295)		(4,758)
(Decrease) increase in interest from subordinated debentures			(723)		(560)

Hedging interest rate forwards
Increase in other income			202		123

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 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 both March 31, 2024 and December 31, 2023 was $363.7 million. No impairment charges on goodwill or other intangible assets were incurred in 2024 or 2023.

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 March 31, 2024, 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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14 Subordinated Debentures

Subordinated debentures outstanding are as follows:


			March 31, 2024		December 31, 2023
	Due	Rate	Amount			Amount
			(dollars in thousands)
Owed to:

First Commonwealth Bank	2028	3-Month CME Term SOFR + 0.26161% + 1.845%	$	49,615		$	49,592
First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month CME Term SOFR + 0.26161% + 2.37%	49,358			49,341
First Commonwealth Financial Corp	2031	4.50% until March 29, 2026, then Prime + 1.00%	6,663			6,641
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			$	177,803		$	177,741

With the acquisition of Centric in January 2023, 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 Bank 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. As of March 31, 2024, unamortized deferred issuance costs totaled $0.4 million.

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.

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".

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 $1.1 million and $1.0 million in commission expense as of March 31, 2024 and 2023, respectively.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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


	For the Three Months Ended March 31,
		2024		2023
		(dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income		$	2,727	$	2,486
Service charges on deposit accounts		5,383		4,918
Insurance and retail brokerage commissions		2,246		2,552
Card-related interchange income		6,690		6,829
Gain on sale of other loans and assets		134		61
Other income		1,131		1,069
Noninterest Income (in-scope of Topic 606)		18,311		17,915
Noninterest Income (out-of-scope of Topic 606)		5,677		5,048
Total Noninterest Income		$	23,988	$	22,963

Note 16 Subsequent Event

As of March 31, 2024, the Company holds 26,681 shares of non-transferable Class B-1 shares of Visa, Inc., which are carried at a cost basis of zero. On April 8, 2024, Visa commenced an exchange offer for any and all outstanding shares of its Class B-1 common stock for a combination of Visa's Class B-2 common stock, Class C common stock and where applicable cash in lieu of fractional shares. As part of this exchange, each share of Class B-1 common stock would be exchanged for one half share of the newly issued Class B-2 common stock and Class C common stock would be issued in an amount equivalent to one half of a share of Class B-1 common stock. The Company opted to participate in this exchange offer prior to its expiration on May 3, 2024 and received 13,340 Class B-2 shares and 5,294 Class C shares. The newly issued Class C shares will be sold by Visa at market prices over a period of 90 days after the exchange. As of April 30, 2024, the value of the Class C shares is approximately $5.7 million. The Class B-2 shares will continue to be carried by the company with a zero basis.

On April 22, 2024, the Company provided notice to redeem $50.0 million of First Commonwealth Bank's ten-year subordinated notes with an original maturity date of June 1, 2028. The redemption will occur on June 1, 2024 at a redemption price equal to

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. On June 1, 2024, with the redemption of the subordinated notes, $0.4 million in remaining unamortized deferred issuance costs will be fully recognized in noninterest expense.

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 months ended March 31, 2024 and 2023, 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.

•The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply.

•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.

•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.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

•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 page 58 for the three months ended March 31, 2024 and 2023.

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 March 31,
		2024			2023
		(dollars in thousands, except per share data)
Net Income		$	37,549		$	30,224
Per Share Data:
Basic Earnings per Share		$	0.37		$	0.30
Diluted Earnings per Share		0.37			0.30
Cash Dividends Declared per Common Share		0.125			0.120
Average Balance:
Total assets		$	11,521,443		$	10,488,908
Total equity		1,325,326			1,161,054
End of Period Balance:
Net loans and leases (1)		$	8,912,667		$	8,534,110
Total assets		11,694,408			11,113,752
Total deposits		9,446,403			9,234,948
Total equity		1,332,720			1,225,014
Key Ratios:
Return on average assets		1.31		%	1.17		%
Return on average equity		11.40		%	10.56		%
Dividends payout ratio		33.78		%	40.00		%
Average equity to average assets ratio		11.50		%	11.07		%
Net interest margin		3.52		%	4.01		%
Net loans to deposits ratio		94.35		%	92.41		%

(1) Includes loans held for sale.

Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net Income

For the three months ended March 31, 2024, First Commonwealth had net income of $37.5 million, or $0.37 diluted earnings per share, compared to net income of $30.2 million, or $0.30 diluted earnings per share, in the three months ended March 31, 2023. The increase in net income was primarily the result of a $5.8 million decrease in noninterest expense as a result of $8.5 million in expenses related to the Centric acquisition recognized in the three months ended March 31, 2023. Other items impacting net income include a $3.8 million decrease in the provision for credit losses and a $1.0 million increase in noninterest income, offset by a $2.1 million decrease in net interest income.

For the three months ended March 31, 2024, the Company’s return on average equity was 11.40% and its return on average assets was 1.31%, compared to 10.56% and 1.17%, respectively, for the three months ended March 31, 2023.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $92.6 million in the first three months of 2024, compared to $94.7 million for the same period in 2023. The decrease in net interest income can be attributed to a 150 basis point increase in the cost of interest-bearing liabilities offset by a 68 basis point increase in the yield on interest-earning assets. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 79.4% and 80.4% for the three months ended March 31, 2024 and 2023, respectively.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The net interest margin on a fully taxable equivalent basis was 3.52% for the three months ended March 31, 2024 and 4.01% for the three months ended March 31, 2023. 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 5.54% for the three months ended March 31, 2024, an increase of 68 basis points compared to the 4.86% yield for the same period in 2023. This change is a result of the higher interest rate environment and resulted in the loan portfolio yield increasing by 68 basis points when compared to the three months ended March 31, 2023. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased 64 basis points due to the impact on loan repricing and new volumes at higher interest rates, as the Federal Reserve increased short term interest rates by 50 basis points since March 31, 2023. Additionally, 8 basis points of the yield on interest-earnings assets can be attributed to the recognition of $2.0 million in accretion of purchase accounting marks, primarily from the Centric acquisition. For the three months ended March 31, 2023, accretion of purchase accounting marks contributed $1.1 million, or 5 basis points, to the yield on interest-earning assets.

The investment portfolio yield increased 93 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance for the period ended March 31, 2024 increased $239.1 million as compared to the three months ended March 31, 2023 as a result of liquidity from growth in interest-bearing liabilities. The yield on interest-bearing deposits with banks increased 116 basis points for the three months ended March 31, 2024 as compared to the prior year in conjunction with the increase in the average balance from $46.3 million in 2023 to $112.4 million in 2024.

The cost of interest-bearing liabilities increased to 2.77% for the three months ended March 31, 2024, from 1.27% for the same period in 2023. The cost of interest-bearing deposits increased 148 basis points and short-term borrowings increased 92 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 three months ended March 31, 2024 with the comparable period in 2023, average time deposits increased $704.8 million, or 103.3%, with an increase in the cost of these deposits of 187 basis points. Other interest-bearing deposits increased on average $242.6 million, or 4.6%, compared to the three months ended March 31, 2023 and the cost of these deposits increased 123 basis points. Compared to the prior period, short-term borrowings increased an average of $329.0 million in order to fund growth in loans and investments.

For the three months ended March 31, 2024, changes in rates negatively impacted net interest income by $5.5 million when compared with the same period in 2023. The higher yield on interest-earning assets positively impacted net interest income by $19.9 million, while the increase in the cost of interest-bearing liabilities negatively impacted net interest income by $25.3 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $3.4 million for the three months ended March 31, 2024, as compared to the same period in 2023. Higher levels of interest-earning assets resulted in an increase of $11.0 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $7.6 million. Average interest-earning assets for the three months ended March 31, 2024 increased $1.0 billion, or 10.5%, compared to the same period in 2023. Average loans for the comparable period increased $0.7 billion, or 8.4%.

Net interest income was negatively impacted by a $275.2 million decrease in average net free funds for the three months ended March 31, 2024 as compared to March 31, 2023. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The level of net free funds was impacted by a lower level of noninterest-bearing demand deposits as customers became more rate sensitive and moved their funds into interest-bearing deposits.

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 March 31:

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


	2024		2023
	(dollars in thousands)
Interest income per Consolidated Statements of Income	$	145,462	$	114,589
Adjustment to fully taxable equivalent basis	323		305
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	145,785		114,894
Interest expense	53,158		20,231
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	92,627	$	94,663

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 March 31:


	2024						2023
	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	$	112,436	$	1,573	5.63	%	$	46,304	$	510	4.47	%
Tax-free investment securities	20,467		137		2.69		21,983		148		2.73
Taxable investment securities	1,451,770		11,021		3.05		1,211,190		6,294		2.11
Loans and leases, net of unearned income (b)(c)	8,998,649		133,054		5.95		8,301,449		107,942		5.27
Total interest-earning assets	10,583,322		145,785		5.54		9,580,926		114,894		4.86
Noninterest-earning assets:
Cash	117,297						112,157
Allowance for credit losses	(119,817)						(123,672)
Other assets	940,641						919,497
Total noninterest-earning assets	938,121						907,982
Total Assets	$	11,521,443					$	10,488,908
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	1,859,693	$	7,701	1.67	%	$	1,848,228	$	3,732	0.82	%
Savings deposits (d)	3,694,963		21,488		2.34		3,463,858		7,853		0.92
Time deposits	1,386,959		14,531		4.21		682,144		3,933		2.34
Short-term borrowings	595,884		6,765		4.57		266,932		2,401		3.65
Long-term debt	186,597		2,673		5.76		185,367		2,312		5.06
Total interest-bearing liabilities	7,724,096		53,158		2.77		6,446,529		20,231		1.27
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	2,302,338						2,678,849
Other liabilities	169,683						202,476
Shareholders’ equity	1,325,326						1,161,054
Total Noninterest-Bearing Funding Sources	3,797,347						4,042,379
Total Liabilities and Shareholders’ Equity	$	11,521,443					$	10,488,908
Net Interest Income and Net Yield on Interest-Earning Assets			$	92,627	3.52	%			$	94,663	4.01	%

(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 March 31, 2024 and 2023.

(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 March 31, 2024 compared with March 31, 2023:


	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	$	1,063	$	729	$	334
Tax-free investment securities	(11)		(10)		(1)
Taxable investment securities	4,727		1,252		3,475
Loans and leases	25,112		9,060		16,052
Total interest income (b)	30,891		11,031		19,860
Interest-bearing liabilities:
Interest-bearing demand deposits	3,969		23		3,946
Savings deposits	13,635		524		13,111
Time deposits	10,598		4,067		6,531
Short-term borrowings	4,364		2,961		1,403
Long-term debt	361		15		346
Total interest expense	32,927		7,590		25,337
Net interest income	$	(2,036)	$	3,441	$	(5,477)

(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 three months ended March 31:


	2024				2023
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,292	22	%	$	991	(170)	%
Time and demand	(565)		(10)		179		(31)
Commercial credit cards	71		1		20		(3)
Equipment finance	1,263		22		420		(72)
Time and demand other	523		9		372		(64)
Real estate construction	(875)		(15)		(2,798)		482
Construction other	(653)		(11)		(1,842)		317
Construction residential	(222)		(4)		(956)		165
Residential real estate	13		—		261		(45)
Residential first lien	(107)		(2)		358		(62)
Residential junior lien/home equity	120		2		(97)		17
Commercial real estate	2,201		39		307		(53)
Multifamily	(8)		—		67		(12)
Non-owner occupied	2,308		41		238		(41)
Owner occupied	(99)		(2)		2		—
Loans to individuals	3,051		54		659		(114)
Automobile and recreational vehicles	2,490		44		599		(104)
Consumer credit cards	107		2		5		(1)
Consumer other	454		8		55		(9)

Provision for credit losses on loans and leases	$	5,682	100	%	$	(580)	100	%
Provision for credit losses - acquisition day 1 non-PCD	—				10,653
Total provision for credit losses on loans and leases	5,682				10,073
Provision for off-balance sheet credit exposure	(1,444)				(2,070)
Total provision for credit losses	$	4,238			$	8,003

Total provision expense for the three months ended March 31, 2024, decreased $3.8 million compared to the three months ended March 31, 2023. This decrease 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 $6.3 million increase in the provision for credit losses on loans and leases and a $0.6 million increase in the provision for off-balance sheet commitments. The increase in the provision for credit losses on loans and leases can be attributed to $4.3 million in net charge-offs recognized during the three months ended March 31, 2024 as well as $0.3 million in additional qualitative reserves related to the commercial real estate portfolio to provide for the risks related to changing collateral values. The negative provision for off-balance sheet commitments for the three months ended March 31, 2024 was a result of lower off-balance sheet commitments related to construction loans.

The allowance for credit losses was $119.1 million, or 1.32%, of total loans and leases outstanding at March 31, 2024, compared to $117.7 million, or 1.31%, at December 31, 2023 and $133.9 million, or 1.55%, at March 31, 2023. Nonperforming loans as a percentage of total loans and leases decreased to 0.47% at March 31, 2024 from 0.51% as of March 31, 2023 and increased from 0.44% at December 31, 2023. The allowance to nonperforming loan ratio was 280.59%, 298.23% and 302.67% as of March 31, 2024, December 31, 2023 and March 31, 2023, 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 March 31, 2024.

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 March 31, 2024 and 2023 and the year-ended December 31, 2023:


	March 31, 2024			March 31, 2023			December 31, 2023
	(dollars in thousands)
Balance, beginning of period	$	117,718		$	102,906		$	102,906
Day 1 allowance for credit loss on PCD acquired loans	—			22,079			27,205
Provision for credit losses - acquisition day 1 non-PCD	—			10,653			10,653
Loans charged off:
Commercial, financial, agricultural and other	2,662			663			19,199
Real estate construction	—			—			—
Residential real estate	80			79			561
Commercial real estate	283			—			6,277
Loans to individuals	2,538			1,141			7,230
Total loans charged off	5,563			1,883			33,267
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	420			159			498
Real estate construction	6			—			—
Residential real estate	59			38			247
Commercial real estate	114			42			151
Loans to individuals	662			471			2,219
Total recoveries	1,261			710			3,115
Net charge-offs	4,302			1,173			30,152
Provision for credit losses on loans and leases charged to expense	5,682			(580)			7,106
Balance, end of period	$	119,098		$	133,885		$	117,718
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.19		%	0.06		%	0.35		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding	1.32		%	1.55		%	1.31		%

Noninterest Income

The following table presents the components of noninterest income for the three months ended March 31:


	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	2,727	$	2,486	$	241	10	%
Service charges on deposit accounts	5,383		4,918		465		9
Insurance and retail brokerage commissions	2,246		2,552		(306)		(12)
Income from bank owned life insurance	1,294		1,227		67		5
Card-related interchange income	6,690		6,829		(139)		(2)
Swap fee income	—		245		(245)		(100)
Other income	2,257		2,057		200		10

Net securities gains	—		—		—		N/A
Gain on sale of mortgage loans	1,328		652		676		104
Gain on sale of other loans and assets	2,051		2,086		(35)		(2)
Derivatives mark to market	12		(89)		101		(113)

Total noninterest income	$	23,988	$	22,963	$	1,025	4	%

Total noninterest income, excluding gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market for the three months ended March 31, 2024, increased, $0.3 million, or 1%, compared to the three months ended

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

March 31, 2023. Service charges on deposit accounts increased $0.5 million due to increased customer activity. Trust income increased $0.2 million due to gains in the value of assets under management. Insurance and retail brokerage commissions decreased $0.3 million due to lower annuity sales and swap fee income declined $0.2 million as there were no new interest rate swaps entered into by our commercial loan customers.

Total noninterest income increased $1.0 million, or 4%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a $0.7 million increase 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 increased $0.1 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.

Noninterest Expense

The following table presents the components of noninterest expense for the three months ended March 31:


	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	35,324	$	34,264	$	1,060	3	%
Net occupancy	5,334		5,018		316		6
Furniture and equipment	4,480		4,238		242		6
Data processing	3,824		3,404		420		12
Advertising and promotion	1,319		1,663		(344)		(21)

Pennsylvania shares tax	1,202		1,252		(50)		(4)
Intangible amortization	1,264		1,147		117		10

Other professional fees and services	1,242		1,591		(349)		(22)
FDIC insurance	1,613		1,417		196		14

Other operating	8,717		8,062		655		8
Subtotal	64,319		62,056		2,263		4
Loss on sale or write-down of assets	143		41		102		249


Merger and acquisition related	114		8,541		(8,427)		(99)



Litigation and operational losses	997		743		254		34
Total noninterest expense	$	65,573	$	71,381	$	(5,808)	(8)	%

Noninterest expense decreased $5.8 million, or 8%, for the three months ended March 31, 2024 compared to the same period in 2023. This decrease is primarily the result of $8.5 million in merger-related expenses associated with the Centric acquisition recognized in during the first quarter of 2023. Offsetting this is a $1.1 million increase in salaries and benefits expense primarily due to annual merit salary increases and the inclusion of Centric employees for three months in 2024, as compared to two months in 2023. The number of full time equivalent employees totaled 1,536 at March 31, 2023 and 1,465 at March 31, 2024. Increases in net occupancy, furniture and equipment and intangible amortization all reflected increases primarily due to the Centric acquisition. Data processing costs increased $0.4 million due to continued investment in our digital banking and other product offerings. Litigation and operational losses increased $0.3 million primarily due to increased fraud losses. Contributing to the increase in other operating expenses were several expense categories, including collection and repossession, other loan expense, checkbook printing, armored courier and travel, none of which were individually significant.

Income Tax

The provision for income taxes increased $1.2 million for the three months ended March 31, 2024, compared to the corresponding period in 2023, 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 three months ended March 31, 2024 and 2023.

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 19.2% and 20.3% for the three months ended March 31, 2024 and 2023, respectively.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

As of March 31, 2024, our deferred tax assets totaled $61.9 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 current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.

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 three months of 2024, the maturity and redemption of investment securities provided $45.2 million in liquidity. These funds contributed to the liquidity used to originate loans, purchase investment securities and fund depositor withdrawals.

The following represents our expanded sources of liquidity as of March 31, 2024:


	Total Available		Amount Used		Outstanding Letters of Credit		Net Available
	(dollars in thousands)
Internal liquidity sources
Unencumbered securities	$	490,196	$	—	$	—	$	490,196
Other (excess pledged)	66,934		—		—		66,934
External liquidity sources
FHLB advances	2,445,294		3,932		514,400		1,926,962
FRB borrowings	1,728,789		516,000		—		1,212,789
Lines with other financial institutions	160,000		—		—		160,000

Brokered deposits (1)	1,166,487		27,890		—		1,138,597

Total liquidity	$	6,057,700	$	547,822	$	514,400	$	4,995,478

(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 March 31, 2024, the outstanding balance of $27.9 million carried an average weighted rate of 4.02% and an average original term of 246 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 first quarter of 2024, borrowings of $516.0 million at a rate of 4.76% were originated under the Federal Reserve's Bank Term Funding Program in order to fund growth in loans and investments. These borrowings have a maturity date of January 16, 2025 and can be repaid without penalty at any time.

On April 25, 2024, $311.0 million of the letters of credit with the FHLB of Pittsburgh matured and were not renewed.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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:


	March 31, 2024		December 31, 2023
	(dollars in thousands)
Noninterest-bearing demand deposits(a)	$	2,334,495	$	2,388,533
Interest-bearing demand deposits(a)	637,908		629,138
Savings deposits(a)	4,999,822		4,886,781
Time deposits	1,474,178		1,287,857
Total	$	9,446,403	$	9,192,309

(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 three months of 2024, total deposits increased $254.1 million. Interest-bearing demand and savings deposits increased $121.8 million, time deposits increased $186.3 million and noninterest-bearing demand deposits decreased $54.0 million.

The estimated total of uninsured deposits was $2.5 billion at both March 31, 2024 and December 31, 2023, of which $0.8 billion were secured by pledged investment securities or letters of credit at both March 31, 2024 and December 31, 2023. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.

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 0.71 and 0.69 at March 31, 2024 and December 31, 2023, 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.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following is the gap analysis as of March 31, 2024 and December 31, 2023:


	March 31, 2024
	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	$	3,676,964		$	441,898		$	768,163		$	4,887,025		$	3,133,916		$	911,799
Investments	104,840			48,735			93,727			247,302			622,218			744,151
Other interest-earning assets	232,054			—			—			232,054			1,134			—
Total interest-sensitive assets (ISA)	4,013,858			490,633			861,890			5,366,381			3,757,268			1,655,950
Certificates of deposit	236,073			386,036			664,939			1,287,048			186,350			967
Other deposits	5,637,730			—			—			5,637,730			—			—
Borrowings	675,578			208			417			676,203			52,971			128
Total interest-sensitive liabilities (ISL)	6,549,381			386,244			665,356			7,600,981			239,321			1,095
Gap	$	(2,535,523)		$	104,389		$	196,534		$	(2,234,600)		$	3,517,947		$	1,654,855
ISA/ISL	0.61			1.27			1.30			0.71			15.70			1,512.28
Gap/Total assets	21.68		%	0.89		%	1.68		%	19.11		%	30.08		%	14.15		%


	December 31, 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	$	3,619,166		$	446,373		$	756,190		$	4,821,729		$	3,137,007		$	945,896
Investments	72,358			44,567			97,544			214,469			606,670			733,418
Other interest-earning assets	20,440			—			—			20,440			1,117			—
Total interest-sensitive assets (ISA)	3,711,964			490,940			853,734			5,056,638			3,744,794			1,679,314
Certificates of deposit	271,662			210,793			569,507			1,051,962			235,562			974
Other deposits	5,515,919			—			—			5,515,919			—			—
Borrowings	726,850			207			415			727,472			53,069			224
Total interest-sensitive liabilities (ISL)	6,514,431			211,000			569,922			7,295,353			288,631			1,198
Gap	$	(2,802,467)		$	279,940		$	283,812		$	(2,238,715)		$	3,456,163		$	1,678,116
ISA/ISL	0.57			2.33			1.50			0.69			12.97			1,401.76
Gap/Total assets	24.46		%	2.44		%	2.48		%	19.54		%	30.16		%	14.64		%

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)
March 31, 2024 ($)	$	(22,010)		$	(10,972)		$	7,356		$	13,367
March 31, 2024 (%)	(5.46)		%	(2.72)		%	1.83		%	3.32		%

December 31, 2023 ($)	$	(9,867)		$	(4,504)		$	6,215		$	11,091
December 31, 2023 (%)	(2.53)		%	(1.16)		%	1.59		%	2.84		%

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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)
March 31, 2024 ($)	$	(41,727)		$	(21,904)		$	22,056		$	41,831
March 31, 2024 (%)	(10.35)		%	(5.44)		%	5.47		%	10.38		%

December 31, 2023 ($)	$	(38,890)		$	(17,930)		$	18,545		$	34,788
December 31, 2023 (%)	(9.97)		%	(4.60)		%	4.76		%	8.92		%

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 three months ended March 31, 2024 and 2023, the cost of our interest-bearing liabilities averaged 2.77% and 1.27%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.54% and 4.86%, 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 $5.9 million at March 31, 2024 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.

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 $3.0 million to $42.4 million at March 31, 2024, compared to $39.5 million at December 31, 2023. The increase in nonperforming loans is primarily a result of $13.5 million in commercial loans that were moved to nonaccrual during the first three months of 2024. Offsetting these additions is the payoff of an $8.1 million commercial real estate relationship accompanied by a $0.2 million charge-off and the charge-off of a $1.4 million commercial, financial, agricultural and other relationship.

The allowance for credit losses as a percentage of nonperforming loans was 280.59% as of March 31, 2024, compared to 298.23% at December 31, 2023, and 302.67% at March 31, 2023. 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

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of $5.9 million and general reserves of $113.2 million as of March 31, 2024. Specific reserves increased $0.9 million from December 31, 2023, and decreased $8.8 million from March 31, 2023. The increase from December 31, 2023 is primarily due to $1.2 million in specific reserves on nonperforming loans moved to nonaccrual and a $1.3 million increase in specific reserves on two commercial real estate relationships. Offsetting this is the $1.4 million charge-off on a commercial, financial, agricultural and other relationship, which was fully reserved. The decrease from March 31, 2023 is due to the sale of nonperforming loans releasing specific reserves of $3.1 million and the charge-off of $5.5 million related to three commercial, financial, agricultural and other relationships and $0.5 million related to a commercial real estate relationship, all of which were fully reserved.

Criticized loans totaled $211.9 million at March 31, 2024 and represented 2% of the loan portfolio. The level of criticized loans increased as of March 31, 2024 when compared to December 31, 2023, by $1.7 million, or 1%. Classified loans totaled $89.3 million at March 31, 2024 compared to $87.1 million at December 31, 2023, an increase of $2.2 million, or 3%. The increase in classified loans can be attributed to the increase in nonperforming loans.

The allowance for credit losses was $119.1 million at March 31, 2024, or 1.32% of total loans and leases outstanding, compared to 1.31% reported at December 31, 2023, and 1.55% at March 31, 2023. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were 1.26% at March 31, 2024 compared to 1.26% at December 31, 2023 and 1.38% at March 31, 2023.

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:


	March 31,								December 31, 2023
	2024				2023
	(dollars in thousands)
Nonperforming Loans:




Total nonperforming loans	$	42,446			$	44,234				$	39,472
Loans past due 30 to 90 days and still accruing	$	32,027			$	15,809				$	20,116
Loans past due in excess of 90 days and still accruing	$	1,699			$	1,440				$	9,436
Other real estate owned	$	368			$	424				$	422
Loans held for sale at end of period	$	31,895			$	11,050				$	29,820
Portfolio loans and leases outstanding at end of period	$	8,999,870			$	8,656,945				$	8,968,761
Average loans and leases outstanding	$	8,998,649		(a)	$	8,301,449		(a)		$	8,714,770		(b)
Nonperforming loans as a percentage of total loans and leases	0.47		%		0.51		%			0.44		%
Provision for credit losses on loans and leases (e)	$	5,682		(a)	$	(580)		(a)		$	7,106		(b)
Provision for credit losses - acquisition day 1 non-PCD	$	—			$	10,653				$	10,653
Allowance for credit losses	$	119,098			$	133,885				$	117,718
Net charge-offs	$	4,302		(a)	$	1,173		(a)		$	30,152		(b)
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.19		%		0.06		%			0.35		%
Provision for credit losses as a percentage of net charge-offs (e)	132.08		%	(a)	(49.45)		%	(a)		23.57		%	(b)
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	1.32		%		1.55		%			1.31		%



Allowance for credit losses as a percentage of nonperforming loans (d)	280.59		%		302.67		%			298.23		%

(a)For the three-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:


	March 31, 2024				December 31, 2023
	Amount		%		Amount		%
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,593,836	18	%	$	1,543,349	17	%
Real estate construction	559,367		6		597,735		7
Residential real estate	2,402,272		27		2,416,876		27
Commercial real estate	3,090,950		34		3,053,152		34
Loans to individuals	1,353,445		15		1,357,649		15
Total loans and leases, net of unearned income	$	8,999,870	100	%	$	8,968,761	100	%

During the three months ended March 31, 2024, loans increased $31.1 million, or 0.3%, compared to balances outstanding at December 31, 2023.

Real estate construction loans decreased $38.4 million, or 6.4%, due to the completion of commercial real estate projects. Residential real estate decreased $14.6 million, or 0.6%, primarily due to sale of closed-end 1-4 family mortgage loans originated for sale. Commercial real estate loans increased $37.8 million, or 1.2%, primarily due to growth in loans secured by nonresidential property, due in part to the completion of several construction projects. Loans to individuals decreased $4.2 million, or 0.3%, primarily due to declines in the personal lines of credit portfolio. Commercial, financial, agricultural and other loans increased $50.5 million, or 3.3%, primarily due to growth in the equipment finance portfolio.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Commercial real estate comprises 34% of our total loan portfolio. The following table summarizes the commercial real estate portfolio by type of property securing the credit.


	March 31, 2024				December 31, 2023
	Amount		%		Amount		%
	(dollars in thousands)
Land	$	2,308	0.1	%	$	3,180	0.1	%
Residential 1-4	16,311		0.5		39,776		1.3
Industrial and Storage	481,189		15.6		456,759		15.0
Multifamily	645,184		20.9		597,262		19.6
Office	524,181		17.0		550,889		18.0
Healthcare	159,080		5.1		149,909		4.9
Student Housing	88,030		2.8		88,557		2.9
Retail	748,828		24.2		750,899		24.6
Hospitality	224,395		7.3		210,485		6.9
Specialty Use	189,441		6.1		192,570		6.3
Other	12,003		0.4		12,866		0.4
Total	$	3,090,950	100.0	%	$	3,053,152	100.0	%

When calculating the allowance for credit losses the commercial real estate portfolio is segmented into three portfolio segments: multifamily, non-owner occupied and owner occupied. For additional information related to these segments, including credit quality, see Note 8 "Loans and Leases and Allowance for Credit Losses" of the unaudited consolidated financial statements.

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 March 31, 2024.


	For the Three Months Ended March 31, 2024						As of March 31, 2024
	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	$	2,242	52.11	%	0.10	%	$	9,757	22.99	%	0.11	%
Real estate construction	(6)		(0.14)		—		3,288		7.75		0.04
Residential real estate	21		0.49		—		9,019		21.25		0.10
Commercial real estate	169		3.93		0.01		20,236		47.67		0.22
Loans to individuals	1,876		43.61		0.08		146		0.34		—
Total loans and leases, net of unearned income	$	4,302	100.00	%	0.19	%	$	42,446	100.00	%	0.47	%

Net charge-offs for the three months ended March 31, 2024 totaled $4.3 million, compared to $1.2 million for the three months ended March 31, 2023. The most significant charge-off during the three months ended March 31, 2024 included $1.4 million for a commercial, financial, agricultural and other loan which was fully provided for as part of Centric purchase accounting marks. Additionally, $1.9 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 March 31, 2024, shareholders’ equity was $1.3 billion, an increase of $18.4 million from December 31, 2023. The increase was primarily the result of $37.5 million in net income. Offsetting this increase was a $7.3 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 $2.8 million in treasury stock sales and decreases due to $12.8 million of dividends paid to shareholders and $1.8 million of common stock repurchases. Cash dividends declared per common share were $0.125 for the three months ended March 31, 2024.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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.

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 March 31, 2024, this subordinated debt issuance increased the total risk-based capital ratio by 95 basis points. The Company has announced the redemption of $50 million of this subordinated debt as of June 1, 2024. The impact of this redemption on the total risk based capital ratio is a decrease of 44 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 March 31, 2024 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 4 to 6 basis points.

As of March 31, 2024, 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	$	1,342,820	14.27	%		$	988,359	10.50	%	$	941,294	10.00	%
First Commonwealth Bank	1,244,857		13.25			986,440		10.50		939,467		10.00
Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,143,916	12.15	%		$	800,100	8.50	%	$	753,035	8.00	%
First Commonwealth Bank	1,045,953		11.13			798,547		8.50		751,574		8.00
Tier I Capital to Average Assets
First Commonwealth Financial Corporation	$	1,143,916	10.15	%		$	450,665	4.00	%	$	563,332	5.00	%
First Commonwealth Bank	1,045,953		9.32			448,940		4.00		561,175		5.00
Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,073,916	11.41	%		$	658,906	7.00	%	$	611,841	6.50	%
First Commonwealth Bank	1,045,953		11.13			657,627		7.00		610,654		6.50

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

On April 23, 2024, First Commonwealth Financial Corporation declared a quarterly dividend of $0.13 per share payable on May 17, 2024 to shareholders of record as of May 3, 2024. 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 March 31, 2024, 2,491,577 common shares had been repurchased under theses program at an average price of $13.08 per share. There were no repurchases during the three months ended March 31, 2024.

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

fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption

permitted. The adoption of ASU 2023-02 did not have a material impact on the Company's consolidated financial statements.

In December 2023, FASB released Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740):

Improvements to Income Tax Disclosures. ASU 2023-09 requires additional disclosure information in specified categories with

respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state and foreign

income taxes. ASU 2023-09 also requires greater detail about individual reconciling items in the rate reconciliation for those

items that exceed a specified threshold. In addition to the new rate reconciliation disclosures, ASU 2023-09 requires

information related to taxes paid (net of refunds received) to be disaggregated for federal, state and foreign taxes, along with

further disaggregation for specific jurisdictions, to the extent the related amounts exceed a quantitative threshold. ASU 2023-09

is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. ASU

2023-09 should be applied prospectively, with an option for retrospective application to each period in the financial statements.

The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

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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 1-934 (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.

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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, 2023.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1trading arrangement during quarter ended March 31, 2024, as such terms are defined under Item 408(a) of Regulation S-K. On February 22, 2024, the Corporation entered into a Rule 10b5-1 Issuer Repurchase Plan with a registered broker to effect repurchases of the Corporation’s common stock under the Corporation’s treasury stock repurchase program. The 10b5-1 issuer repurchase plan will terminate upon the earlier of $5,000,00 in shares of common stock authorized for repurchase having been repurchased or April 30, 2024.

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 6. EXHIBITS

Exhibit
Number

Description

Incorporated by Reference to

10.1

2024 Annual Incentive Plan

Filed herewith

10.2

2024-2026 Long-Term Incentive Plan

Filed herewith

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: May 7, 2024						/s/ T. Michael Price
						T. Michael Price President and Chief Executive Officer

DATED: May 7, 2024						/s/ James R. Reske
						James R. Reske Executive Vice President, Chief Financial Officer and Treasurer