0000712537fcf:~~TermLoanReceivableOriginatedFiveOrMoreYearsPriorMemberus-gaap:SeniorLienMember2021-12-31~~TermLoanReceivableOriginatedInOneYearPriorMemberus-gaap:PassMemberfcf:ConsumerCreditCardsMember2023-03-310000712537us-gaap:FairValueInputsLevel2Member2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


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

For the transition period from to

Commission File Number 001-11138

First Commonwealth Financial Corporation

(Exact name of registrant as specified in its charter)


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

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

724-349-7220

(Registrant’s telephone number, including area code)

N/A

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

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


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

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

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

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

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

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

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

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

The number of shares outstanding of issuer’s common stock, $1.00 par value, as of ~~November 4, 2022,~~May 9, 2023, was ~~93,376,314.~~102,890,733.

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)	98
	Notes to the Unaudited Consolidated Financial Statements	109

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5452

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	8070

ITEM 4.	Controls and Procedures	8070

PART II.	Other Information

ITEM 1.	Legal Proceedings	8171

ITEM 1A.	Risk Factors	8171

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8171

ITEM 3.	Defaults Upon Senior Securities	8171

ITEM 4.	Mine Safety Disclosures	8172

ITEM 5.	Other Information	8172

ITEM 6.	Exhibits	8273

	Signatures	8374

Table of Contents

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(dollars in thousands, except share data)					(dollars in thousands, except share data)
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	106,153	$	84,738	Cash and due from banks	$	113,692	$	124,254
Interest-bearing bank deposits	Interest-bearing bank deposits	74,619		310,634		Interest-bearing bank deposits	282,110		29,990
Securities available for sale, at fair value	Securities available for sale, at fair value	787,415		1,041,380		Securities available for sale, at fair value	750,613		762,661
Securities held to maturity, at amortized cost (Fair value of $395,160 and $536,651 at September 30, 2022 and December 31, 2021, respectively)		474,790		541,311
Securities held to maturity, at amortized cost (Fair value of $381,741 and $386,205 at March 31, 2023 and December 31, 2022, respectively)						Securities held to maturity, at amortized cost (Fair value of $381,741 and $386,205 at March 31, 2023 and December 31, 2022, respectively)	451,278		461,162
Other investments	Other investments	15,456		12,838		Other investments	36,200		26,414
Loans held for sale	Loans held for sale	13,811		18,583		Loans held for sale	11,050		11,869
Loans and leases:	Loans and leases:					Loans and leases:
Portfolio loans and leases	Portfolio loans and leases	7,348,917		6,839,230		Portfolio loans and leases	8,656,945		7,642,143
Allowance for credit losses	Allowance for credit losses	(96,093)		(92,522)		Allowance for credit losses	(133,885)		(102,906)
Net loans and leases	Net loans and leases	7,252,824		6,746,708		Net loans and leases	8,523,060		7,539,237
Premises and equipment, net	Premises and equipment, net	120,227		120,775		Premises and equipment, net	130,210		115,106
Other real estate owned	Other real estate owned	322		642		Other real estate owned	424		534
Goodwill	Goodwill	303,328		303,328		Goodwill	360,414		303,328
Amortizing intangibles, net	Amortizing intangibles, net	9,622		11,188		Amortizing intangibles, net	25,584		9,205
Bank owned life insurance	Bank owned life insurance	223,990		224,700		Bank owned life insurance	227,024		222,651
Other assets	Other assets	196,073		128,268		Other assets	202,093		199,255
Total assets	Total assets	$	9,578,630	$	9,545,093	Total assets	$	11,113,752	$	9,805,666
Liabilities	Liabilities					Liabilities
Deposits (all domestic):	Deposits (all domestic):					Deposits (all domestic):
Noninterest-bearing	Noninterest-bearing	$	2,782,654	$	2,658,782	Noninterest-bearing	$	2,698,225	$	2,670,508
Interest-bearing	Interest-bearing	5,294,995		5,323,716		Interest-bearing	6,536,723		5,334,961
Total deposits	Total deposits	8,077,649		7,982,498		Total deposits	9,234,948		8,005,469
Short-term borrowings	Short-term borrowings	97,932		138,315		Short-term borrowings	278,978		372,694
Subordinated debentures	Subordinated debentures	170,897		170,775		Subordinated debentures	177,558		170,937
Other long-term debt	Other long-term debt	5,041		5,573		Other long-term debt	4,679		4,862
Capital lease obligation	Capital lease obligation	5,551		5,921		Capital lease obligation	5,294		5,425
Total long-term debt	Total long-term debt	181,489		182,269		Total long-term debt	187,531		181,224
Other liabilities	Other liabilities	198,985		132,639		Other liabilities	187,281		194,205
Total liabilities	Total liabilities	8,556,055		8,435,721		Total liabilities	9,888,738		8,753,592
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	—		—		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; 113,914,902 shares issued at September 30, 2022 and December 31, 2021, and 93,377,064 and 94,233,152 shares outstanding at September 30, 2022 and December 31, 2021, respectively		113,915		113,915
Common stock, $1 par value per share, 200,000,000 shares authorized; 123,603,380 and 113,914,902 shares issued at March 31, 2023 and December 31, 2022, respectively, and 103,193,127 and 93,376,314 shares outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $1 par value per share, 200,000,000 shares authorized; 123,603,380 and 113,914,902 shares issued at March 31, 2023 and December 31, 2022, respectively, and 103,193,127 and 93,376,314 shares outstanding at March 31, 2023 and December 31, 2022, respectively	123,603		113,915
Additional paid-in capital	Additional paid-in capital	497,431		496,121		Additional paid-in capital	630,196		497,431
Retained earnings	Retained earnings	750,335		691,260		Retained earnings	792,720		774,863
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(142,289)		(8,768)		Accumulated other comprehensive loss, net	(124,570)		(137,692)
Treasury stock (20,537,838 and 19,681,750 shares at September 30, 2022 and December 31, 2021, respectively)		(196,817)		(183,156)
Treasury stock (20,410,253 and 20,538,588 shares at March 31, 2023 and December 31, 2022, respectively)						Treasury stock (20,410,253 and 20,538,588 shares at March 31, 2023 and December 31, 2022, respectively)	(196,935)		(196,443)

Total shareholders’ equity	Total shareholders’ equity	1,022,575		1,109,372		Total shareholders’ equity	1,225,014		1,052,074
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	9,578,630	$	9,545,093	Total liabilities and shareholders’ equity	$	11,113,752	$	9,805,666

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		For the Three Months Ended				For the Nine Months Ended					For the Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021				2023		2022
		(dollars in thousands, except share data)										(dollars in thousands, except share data)
Interest Income	Interest Income									Interest Income
Interest and fees on loans and leases	Interest and fees on loans and leases	$	78,722	$	67,259	$	212,631	$	200,939	Interest and fees on loans and leases		$	107,668	$	64,394
Interest and dividends on investments:	Interest and dividends on investments:									Interest and dividends on investments:
Taxable interest	Taxable interest	6,080		6,560		18,844		18,226		Taxable interest		5,789		6,478
Interest exempt from federal income taxes	Interest exempt from federal income taxes	117		142		363		460		Interest exempt from federal income taxes		117		126
Dividends	Dividends	204		105		488		386		Dividends		505		135
Interest on bank deposits	Interest on bank deposits	577		130		1,346		297		Interest on bank deposits		510		111
Total interest income	Total interest income	85,700		74,196		233,672		220,308		Total interest income		114,589		71,244
Interest Expense	Interest Expense									Interest Expense
Interest on deposits	Interest on deposits	1,028		1,269		2,638		4,753		Interest on deposits		15,518		813
Interest on short-term borrowings	Interest on short-term borrowings	50		19		89		77		Interest on short-term borrowings		2,401		21
Interest on subordinated debentures	Interest on subordinated debentures	2,157		2,146		6,429		6,410		Interest on subordinated debentures		2,214		2,129
Interest on other long-term debt	Interest on other long-term debt	48		56		151		596		Interest on other long-term debt		45		52
Interest on lease obligations	Interest on lease obligations	57		61		171		185		Interest on lease obligations		53		57

Total interest expense	Total interest expense	3,340		3,551		9,478		12,021		Total interest expense		20,231		3,072
Net Interest Income	Net Interest Income	82,360		70,645		224,194		208,287		Net Interest Income		94,358		68,172
Provision for credit losses	Provision for credit losses	5,923		330		11,986		1,353		Provision for credit losses		(2,650)		1,964
Provision for credit losses - acquisition day 1 non-PCD										Provision for credit losses - acquisition day 1 non-PCD		10,653		—
Net Interest Income after Provision for Credit Losses	Net Interest Income after Provision for Credit Losses	76,437		70,315		212,208		206,934		Net Interest Income after Provision for Credit Losses		86,355		66,208
Noninterest Income	Noninterest Income									Noninterest Income

Net securities gains	Net securities gains	—		—		2		16		Net securities gains		—		2
Trust income	Trust income	2,777		3,118		8,063		8,340		Trust income		2,486		2,713
Service charges on deposit accounts	Service charges on deposit accounts	5,194		4,770		14,695		13,127		Service charges on deposit accounts		4,918		4,615
Insurance and retail brokerage commissions	Insurance and retail brokerage commissions	2,048		2,218		6,806		6,368		Insurance and retail brokerage commissions		2,552		2,272
Income from bank owned life insurance	Income from bank owned life insurance	1,419		1,486		4,310		4,946		Income from bank owned life insurance		1,227		1,508
Gain on sale of mortgage loans	Gain on sale of mortgage loans	1,485		3,485		4,328		11,615		Gain on sale of mortgage loans		652		1,282
Gain on sale of other loans and assets	Gain on sale of other loans and assets	1,093		2,480		4,511		6,281		Gain on sale of other loans and assets		2,086		2,319
Card-related interchange income	Card-related interchange income	6,980		7,052		20,607		20,885		Card-related interchange income		6,829		6,490
Derivatives mark to market	Derivatives mark to market	6		218		395		1,371		Derivatives mark to market		(89)		347

Swap fee income	Swap fee income	2,326		317		3,933		1,715		Swap fee income		245		453
Other income	Other income	2,586		2,101		6,749		6,022		Other income		2,057		1,975
Total noninterest income	Total noninterest income	25,914		27,245		74,399		80,686		Total noninterest income		22,963		23,976
Noninterest Expense	Noninterest Expense									Noninterest Expense
Salaries and employee benefits	Salaries and employee benefits	32,486		31,066		94,367		88,084		Salaries and employee benefits		34,264		30,932
Net occupancy	Net occupancy	4,629		3,960		13,586		12,614		Net occupancy		5,018		4,787
Furniture and equipment	Furniture and equipment	4,005		4,052		11,592		11,866		Furniture and equipment		4,238		3,730
Data processing	Data processing	3,721		3,196		10,379		9,440		Data processing		3,404		3,188
Advertising and promotion	Advertising and promotion	1,278		1,150		3,938		3,829		Advertising and promotion		1,663		1,226

Pennsylvania shares tax	Pennsylvania shares tax	1,569		1,257		3,487		3,347		Pennsylvania shares tax		1,252		1,005
Intangible amortization	Intangible amortization	746		868		2,470		2,597		Intangible amortization		1,147		862

Other professional fees and services	Other professional fees and services	1,204		1,308		3,622		3,150		Other professional fees and services		1,591		1,221
FDIC insurance	FDIC insurance	796		830		2,196		1,964		FDIC insurance		1,417		698
Loss on sale or write-down of assets	Loss on sale or write-down of assets	54		171		215		223		Loss on sale or write-down of assets		41		75

Litigation and operational losses	Litigation and operational losses	758		589		1,987		1,624		Litigation and operational losses		743		600

Merger and acquisition related	Merger and acquisition related	448		—		448		—		Merger and acquisition related		8,541		—
COVID-19 related		39		50		118		357

Branch consolidation		—		—		(104)		18

Other operating	Other operating	8,168		6,530		23,003		19,316		Other operating		8,062		7,400
Total noninterest expense	Total noninterest expense	59,901		55,027		171,304		158,429		Total noninterest expense		71,381		55,724
Income Before Income Taxes	Income Before Income Taxes	42,450		42,533		115,303		129,191		Income Before Income Taxes		37,937		34,460
Income tax provision	Income tax provision	8,482		8,441		22,855		25,710		Income tax provision		7,713		6,734
Net Income	Net Income	$	33,968	$	34,092	$	92,448	$	103,481	Net Income		$	30,224	$	27,726
Average Shares Outstanding										Average Shares Outstanding		99,560,831		94,078,699

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

Table of Contents


Average Shares Outstanding		93,194,854		95,616,421		93,761,360		95,883,868
											For the Three Months Ended
											March 31,
												2023		2022
												(dollars in thousands, except share data)
Average Shares Outstanding Assuming Dilution	Average Shares Outstanding Assuming Dilution	93,450,259		95,892,304		93,994,158		96,130,602		Average Shares Outstanding Assuming Dilution		99,779,816		94,311,324

Per Share Data: Basic Earnings per Share	Per Share Data: Basic Earnings per Share	$	0.36	$	0.36	$	0.99	$	1.08	Per Share Data: Basic Earnings per Share		$	0.30	$	0.29
Diluted Earnings per Share	Diluted Earnings per Share	$	0.36	$	0.36	$	0.98	$	1.08	Diluted Earnings per Share		$	0.30	$	0.29
Cash Dividends Declared per Common Share	Cash Dividends Declared per Common Share	$	0.120	$	0.115	$	0.355	$	0.340	Cash Dividends Declared per Common Share		$	0.120	$	0.115

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(dollars in thousands)
Net Income $ 33,968 $ 34,092 $ 92,448 $ 103,481
Other comprehensive loss, before tax benefit:
Unrealized holding losses on securities arising during the period (46,213) (4,025) (135,258) (18,122)
Less: reclassification adjustment for gains on securities included in net income — — (2) (16)
Unrealized holding (losses) gains on derivatives arising during the period (11,083) (529) (33,754) 776
Total other comprehensive loss, before tax benefit (57,296) (4,554) (169,014) (17,362)
Income tax benefit related to items of other comprehensive loss 12,032 955 35,493 3,645
Total other comprehensive loss (45,264) (3,599) (133,521) (13,717)
Comprehensive (Loss) Income $ (11,296) $ 30,493 $ (41,073) $ 89,764


	For the Three Months Ended
	March 31,
		2023		2022
		(dollars in thousands)
Net Income		$	30,224	$	27,726
Other comprehensive income (loss), before tax (expense) benefit:
Unrealized holding gains (losses) on securities arising during the period		10,355		(57,251)

Less: reclassification adjustment for gains on securities included in net income		—		(2)
Unrealized holding gains (losses) on derivatives arising during the period		5,806		(17,926)

Total other comprehensive income (loss), before tax (expense) benefit		16,161		(75,179)
Income tax (expense) benefit related to items of other comprehensive income (loss)		(3,039)		15,787
Total other comprehensive income (loss)		13,122		(59,392)
Comprehensive Income (Loss)		$	43,346	$	(31,666)

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF 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			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)											(dollars in thousands, except share and per share data)
Balance at December 31, 2021		94,233,152	$	113,915	$	496,121	$	691,260	$	(8,768)	$	(183,156)		$	1,109,372
Balance at December 31, 2022																Balance at December 31, 2022	93,376,314	$	113,915	$	497,431	$	774,863	$	(137,692)	$	(196,443)	$	1,052,074

Net income	Net income						92,448							92,448		Net income						30,224						30,224
Other comprehensive loss									(133,521)					(133,521)
Cash dividends declared ($0.355 per share)							(33,373)							(33,373)
Other comprehensive income																Other comprehensive income								13,122				13,122
Cash dividends declared ($0.120 per share)																Cash dividends declared ($0.120 per share)						(12,367)						(12,367)

Treasury stock acquired	Treasury stock acquired	(1,132,577)									(15,598)			(15,598)		Treasury stock acquired	(109,112)									(1,732)		(1,732)
Treasury stock reissued	Treasury stock reissued	174,989			580		—				1,612			2,192		Treasury stock reissued	143,412			610		—				1,356		1,966
Restricted stock	Restricted stock	101,500	—		730		—				325			1,055		Restricted stock	94,035	—		488		—				(116)		372

Balance at September 30, 2022		93,377,064	$	113,915	$	497,431	$	750,335	$	(142,289)	$	(196,817)		$	1,022,575
Common stock issued																Common stock issued	9,688,478	9,688		131,667								141,355
Balance at March 31, 2023																Balance at March 31, 2023	103,193,127	$	123,603	$	630,196	$	792,720	$	(124,570)	$	(196,935)	$	1,225,014


		Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock			Total Shareholders’ Equity			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)											(dollars in thousands, except share and per share data)
Balance at December 31, 2020		96,130,751	$	113,915	$	494,683	$	596,614	$	17,233	$	(153,828)		$	1,068,617
Balance at December 31, 2021																Balance at December 31, 2021	94,233,152	$	113,915	$	496,121	$	691,260	$	(8,768)	$	(183,156)	$	1,109,372

Net income	Net income						103,481							103,481		Net income						27,726						27,726
Other comprehensive loss	Other comprehensive loss								(13,717)					(13,717)		Other comprehensive loss								(59,392)				(59,392)
Cash dividends declared ($0.340 per share)							(32,673)							(32,673)
Cash dividends declared ($0.115 per share)																Cash dividends declared ($0.115 per share)						(10,837)						(10,837)

Treasury stock acquired	Treasury stock acquired	(1,194,062)									(15,985)			(15,985)		Treasury stock acquired	(90,614)									(1,488)		(1,488)
Treasury stock reissued	Treasury stock reissued	173,907			771		—				1,493			2,264		Treasury stock reissued	157,251			499		—				1,448		1,947
Restricted stock	Restricted stock	99,089	—		475		—				393			868		Restricted stock	(750)	—		7		—				284		291

Balance at September 30, 2021		95,209,685	$	113,915	$	495,929	$	667,422	$	3,516	$	(167,927)		$	1,112,855
Balance at March 31, 2022																Balance at March 31, 2022	94,299,039	$	113,915	$	496,627	$	708,149	$	(68,160)	$	(182,912)	$	1,067,619

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)~~

Shares
Outstanding Common
Stock Additional
Paid-in-
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss),
net Treasury
Stock Total
Shareholders’
Equity
(dollars in thousands, except share and per share data)
Balance at June 30, 2022 93,705,120 $ 113,915 $ 497,431 $ 727,573 $ (97,025) $ (192,736) $ 1,049,158
Net income 33,968 33,968
Other comprehensive loss (45,264) (45,264)
Cash dividends declared ($0.120 per share) (11,206) (11,206)
Treasury stock acquired (326,656) (4,453) (4,453)
Treasury stock reissued — — — — —
Restricted stock (1,400) — — — 372 372
Balance at September 30, 2022 93,377,064 $ 113,915 $ 497,431 $ 750,335 $ (142,289) $ (196,817) $ 1,022,575

Shares
Outstanding Common
Stock Additional
Paid-in-
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss),
net Treasury
Stock Total
Shareholders’
Equity
(dollars in thousands, except share and per share data)
Balance at June 30, 2021 96,201,628 $ 113,915 $ 495,899 $ 644,362 $ 7,115 $ (154,872) $ 1,106,419
Net income 34,092 34,092
Other comprehensive loss (3,599) (3,599)
Cash dividends declared ($0.115 per share) (11,032) (11,032)
Treasury stock acquired (997,943) (13,327) (13,327)
Treasury stock reissued — — — — —
Restricted stock 6,000 — 30 — 272 302
Balance at September 30, 2021 95,209,685 $ 113,915 $ 495,929 $ 667,422 $ 3,516 $ (167,927) $ 1,112,855

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

~~Table of Contents~~

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data(Continued)~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		For the Nine Months Ended					For the Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022
Operating Activities	Operating Activities	(dollars in thousands)				Operating Activities	(dollars in thousands)
Net income	Net income	$	92,448	$	103,481	Net income	$	30,224	$	27,726
Adjustment to reconcile net income to net cash provided by operating activities:	Adjustment to reconcile net income to net cash provided by operating activities:					Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	11,986		1,353		Provision for credit losses	8,003		1,964
Deferred tax expense	Deferred tax expense	297		1,057		Deferred tax expense	2,218		1,807
Depreciation and amortization	Depreciation and amortization	7,790		8,784		Depreciation and amortization	1,847		2,560
Net gains on securities and other assets	Net gains on securities and other assets	(9,248)		(17,093)		Net gains on securities and other assets	(2,330)		(3,908)
Net amortization of premiums and discounts on securities	Net amortization of premiums and discounts on securities	1,570		3,693		Net amortization of premiums and discounts on securities	378		635

Income from increase in cash surrender value of bank owned life insurance	Income from increase in cash surrender value of bank owned life insurance	(4,113)		(4,617)		Income from increase in cash surrender value of bank owned life insurance	(1,190)		(1,508)
(Increase) decrease in interest receivable		(888)		4,590
Decrease in interest receivable						Decrease in interest receivable	645		45
Mortgage loans originated for sale	Mortgage loans originated for sale	(156,944)		(308,744)		Mortgage loans originated for sale	(31,165)		(51,833)
Proceeds from sale of mortgage loans	Proceeds from sale of mortgage loans	159,078		338,115		Proceeds from sale of mortgage loans	32,462		58,198
Increase in interest payable	Increase in interest payable	1,675		929		Increase in interest payable	2,146		1,282
(Decrease) increase in income taxes payable		(5,222)		2,142
Increase (decrease) in income taxes payable						Increase (decrease) in income taxes payable	5,512		(4,137)

Other-net	Other-net	10,251		(14,267)		Other-net	(10,150)		(1,632)
Net cash provided by operating activities	Net cash provided by operating activities	108,680		119,423		Net cash provided by operating activities	38,600		31,199
Investing Activities	Investing Activities					Investing Activities
Transactions with securities held to maturity:	Transactions with securities held to maturity:					Transactions with securities held to maturity:
Proceeds from maturities and redemptions	Proceeds from maturities and redemptions	66,139		89,698		Proceeds from maturities and redemptions	9,733		28,369
Purchases	Purchases	(200)		(337,054)		Purchases	—		(200)
Transactions with securities available for sale:	Transactions with securities available for sale:					Transactions with securities available for sale:
Proceeds from sales						Proceeds from sales	30,686		—
Proceeds from maturities and redemptions						Proceeds from maturities and redemptions	25,791		50,521

Proceeds from maturities and redemptions		117,718		353,788
Purchases		—		(667,861)
Purchases of FHLB stock	Purchases of FHLB stock	(3,244)		(3,552)		Purchases of FHLB stock	(18,262)		(505)
Proceeds from the redemption of FHLB stock	Proceeds from the redemption of FHLB stock	626		3,060		Proceeds from the redemption of FHLB stock	21,134		201
Proceeds from bank owned life insurance	Proceeds from bank owned life insurance	4,823		5,208		Proceeds from bank owned life insurance	1,216		—
Proceeds from sale of loans	Proceeds from sale of loans	52,906		52,919		Proceeds from sale of loans	30,425		21,767
Proceeds from sale of other assets	Proceeds from sale of other assets	3,862		6,620		Proceeds from sale of other assets	846		1,461

Net cash received from business acquisition						Net cash received from business acquisition	14,492		—

Net increase in loans and leases	Net increase in loans and leases	(563,044)		(37,782)		Net increase in loans and leases	(95,513)		(133,137)

Purchases of premises and equipment and other assets	Purchases of premises and equipment and other assets	(8,037)		(6,056)		Purchases of premises and equipment and other assets	(9,433)		(4,419)
Net cash used in investing activities		(328,451)		(541,012)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	11,115		(35,942)
Financing Activities	Financing Activities					Financing Activities

Net (decrease) increase in other short-term borrowings		(40,383)		381
Net decrease in other short-term borrowings						Net decrease in other short-term borrowings	(266,450)		(42,566)
Net increase in deposits	Net increase in deposits	95,183		497,915		Net increase in deposits	472,706		189,364
Repayments of other long-term debt	Repayments of other long-term debt	(531)		(50,512)		Repayments of other long-term debt	(183)		(175)
Repayments of capital lease obligation	Repayments of capital lease obligation	(372)		(346)		Repayments of capital lease obligation	(131)		(122)

Dividends paid	Dividends paid	(33,373)		(32,673)		Dividends paid	(12,367)		(10,837)
Proceeds from reissuance of treasury stock		245		222

Purchase of treasury stock	Purchase of treasury stock	(15,598)		(15,305)		Purchase of treasury stock	(1,732)		(1,488)

Net cash provided by financing activities	Net cash provided by financing activities	5,171		399,682		Net cash provided by financing activities	191,843		134,176
Net decrease in cash and cash equivalents		(214,600)		(21,907)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	241,558		129,433
Cash and cash equivalents at January 1	Cash and cash equivalents at January 1	395,372		356,581		Cash and cash equivalents at January 1	154,244		395,372
Cash and cash equivalents at September 30		$	180,772	$	334,674
Cash and cash equivalents at March 31						Cash and cash equivalents at March 31	$	395,802	$	524,805

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

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

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

The results of operations for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the full year of ~~2022.~~2023. These interim financial statements should be read in conjunction with First Commonwealth’s ~~2021~~2022 Annual Report on Form 10-K.

Note 2 Acquisition

On ~~August 30, 2022, we entered into an agreement and plan~~January 31, 2023, the Company completed its acquisition of ~~merger to acquire~~ Centric Financial Corporation (“Centric”) and its banking subsidiary, Centric ~~Bank. Based on June 30, 2022 carrying values, Centric will contribute approximately $1.0 billion in total assets, $0.9 billion in total deposits and $0.9 billion in total loans in addition to~~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 ~~MSAs.~~ Metropolitan Service Areas ("MSAs").

The table below summarizes the preliminary net assets acquired (at fair value) and consideration transferred in connection with the Centric acquisition is an all-stock transaction and Centric shareholders will be entitled to receive a fixed exchange ratio of 1.09 shares of First Commonwealth common stock for each Centric common stock. This merger is expected to be completed(dollars in ~~the first quarter of 2023, subject to certain closing conditions, including approval by Centric Shareholders and customary bank regulatory approvals.~~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	925,948
Premises and equipment	12,123
Core deposit intangible	16,671
Bank owned life insurance	4,502
Other assets	18,875
Total assets acquired	1,034,571
Fair value of liabilities assumed
Deposits	757,003
Borrowings	186,716
Other liabilities	6,582
Total liabilities assumed	950,301
Total fair value of identifiable net assets			84,270
Goodwill			$	57,086

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 $57.1 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. While the valuation of the acquired assets and liabilities is substantially complete, fair value estimates are subject to adjustment during the provisional period, which may last up to twelve months subsequent to the acquisition date. During this period, the Company may obtain additional information to refine the valuations and adjust the recorded fair value, although such adjustments are not expected to be significant. Valuations subject to adjustments include, but are not limited to, the fair value of acquired loans, deposits, land and building, core deposit intangible and other assets and liabilities.

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

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

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

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

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, maturity and credit rating.

Accounting for Acquired Loans

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.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $977.1 million of loans acquired from Centric, $302.4 million, or 30.9%, of Centric's loan portfolio, was accounted for as PCD loans.

The following table provides details related to the fair value of acquired PCD loans.


	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	$	82,639	$	(15,949)	$	(84)	$	66,606
Time and demand	82,639		(15,949)		(84)		66,606



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	173,143		(5,313)		(6,193)		161,637
Multifamily	13,169		(234)		(1,413)		11,522
Nonowner occupied	97,037		(2,739)		(1,902)		92,396
Owner occupied	62,937		(2,340)		(2,878)		57,719
Loans to individuals	62		(3)		(3)		56
Automobile and recreational vehicles	62		(3)		(3)		56


Total loans and leases	$	302,355	$	(22,079)	$	(7,255)	$	273,021

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.


	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	$	167,509	$	(5,451)	$	162,058	$	3,482
Time and demand	165,781		(5,342)		160,439		3,436

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

Consumer other	191		(11)		180		4
Total loans and leases	$	674,740	$	(21,813)	$	652,927	$	10,653

Costs related to the acquisition totaled $8.5 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 Supplemental Comprehensive Income Disclosures

The following table identifies the related tax effects allocated to each component of other comprehensive income (“OCI”) in the unaudited Consolidated Statements of Comprehensive Income. Reclassification adjustments related to securities available for sale are included in the "Net securities gains" line in the unaudited Consolidated Statements of Income.
For the Nine Months Ended September 30,
2022 2021
Pretax Amount Tax (Expense) Benefit Net of Tax Amount Pretax Amount Tax (Expense) Benefit Net of Tax Amount
(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period $ (135,258) $ 28,405 $ (106,853) $ (18,122) $ 3,805 $ (14,317)
Reclassification adjustment for gains on securities included in net income (2) — (2) (16) 3 (13)
Total unrealized losses on securities (135,260) 28,405 (106,855) (18,138) 3,808 (14,330)
Unrealized (losses) gains on derivatives:
Unrealized holding (losses) gains on derivatives arising during the period (33,754) 7,088 (26,666) 776 (163) 613
Total unrealized (losses) gains on derivatives (33,754) 7,088 (26,666) 776 (163) 613
Total other comprehensive loss $ (169,014) $ 35,493 $ (133,521) $ (17,362) $ 3,645 $ (13,717)


	For the Three Months Ended March 31,
	2023						2022
	Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount
	(dollars in thousands)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period	$	10,355	$	(1,820)	$	8,535	$	(57,251)	$	12,023	$	(45,228)

Reclassification adjustment for gains on securities included in net income	—		—		—		(2)		—		(2)
Total unrealized gains (losses) on securities	10,355		(1,820)		8,535		(57,253)		12,023		(45,230)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the period	5,806		(1,219)		4,587		(17,926)		3,764		(14,162)

Total unrealized gains (losses) on derivatives	5,806		(1,219)		4,587		(17,926)		3,764		(14,162)




Total other comprehensive income (loss)	$	16,161	$	(3,039)	$	13,122	$	(75,179)	$	15,787	$	(59,392)

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


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


Other comprehensive income (loss) before reclassification adjustment	8,535		—		4,587		13,122		(45,228)		—		(14,162)		(59,390)
Amounts reclassified from accumulated other comprehensive (loss) income	—		—		—		—		(2)		—		—		(2)
Net other comprehensive income (loss) during the period	8,535		—		4,587		13,122		(45,230)		—		(14,162)		(59,392)
Balance at March 31	$	(98,936)	$	268	$	(25,902)	$	(124,570)	$	(48,547)	$	95	$	(19,708)	$	(68,160)

1013

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three Months Ended September 30,
2022 2021
Pretax Amount Tax (Expense) Benefit Net of Tax Amount Pretax Amount Tax (Expense) Benefit Net of Tax Amount
(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period $ (46,213) $ 9,705 $ (36,508) $ (4,025) $ 844 $ (3,181)
Reclassification adjustment for losses on securities included in net income — — — — — —
Total unrealized losses on securities (46,213) 9,705 (36,508) (4,025) 844 (3,181)
Unrealized losses on derivatives:
Unrealized holding losses on derivatives arising during the period (11,083) 2,327 (8,756) (529) 111 (418)
Total unrealized losses on derivatives (11,083) 2,327 (8,756) (529) 111 (418)
Total other comprehensive loss $ (57,296) $ 12,032 $ (45,264) $ (4,554) $ 955 $ (3,599)

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

2022 2021
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 $ (3,317) $ 95 $ (5,546) $ (8,768) $ 20,310 $ (182) $ (2,895) $ 17,233
Other comprehensive loss before reclassification adjustment (106,853) — (26,666) (133,519) (14,317) — 613 (13,704)
Amounts reclassified from accumulated other comprehensive (loss) income (2) — — (2) (13) — — (13)
Net other comprehensive loss during the period (106,855) — (26,666) (133,521) (14,330) — 613 (13,717)
Balance at September 30 $ (110,172) $ 95 $ (32,212) $ (142,289) $ 5,980 $ (182) $ (2,282) $ 3,516

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

2022 2021
Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss) Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss)
(dollars in thousands)
Balance at June 30 $ (73,664) $ 95 $ (23,456) $ (97,025) $ 9,161 $ (182) $ (1,864) $ 7,115
Other comprehensive loss before reclassification adjustment (36,508) — (8,756) (45,264) (3,181) — (418) (3,599)
Amounts reclassified from accumulated other comprehensive (loss) income — — — — — — — —
Net other comprehensive loss during the period (36,508) — (8,756) (45,264) (3,181) — (418) (3,599)
Balance at September 30 $ (110,172) $ 95 $ (32,212) $ (142,289) $ 5,980 $ (182) $ (2,282) $ 3,516

~~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 ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021			2023		2022
		(dollars in thousands)					(dollars in thousands)
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	7,685	$	11,039	Interest	$	18,252	$	1,755
Income taxes	Income taxes	23,621		22,374		Income taxes	19		9,020
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:

Loans transferred to other real estate owned and repossessed assets	Loans transferred to other real estate owned and repossessed assets	2,211		2,533		Loans transferred to other real estate owned and repossessed assets	536		647
Loans transferred from held to maturity to held for sale	Loans transferred from held to maturity to held for sale	47,213		55,700		Loans transferred from held to maturity to held for sale	28,714		18,627

Loans transferred from available for sale to held to maturity	Loans transferred from available for sale to held to maturity	(94)		—		Loans transferred from available for sale to held to maturity	(519)		—
Gross decrease in market value adjustment to securities available for sale		(135,260)		(18,138)
Gross (decrease) increase in market value adjustment to derivatives		(33,754)		776
Gross increase (decrease) in market value adjustment to securities available for sale						Gross increase (decrease) in market value adjustment to securities available for sale	10,356		(57,254)
Gross increase (decrease) in market value adjustment to derivatives						Gross increase (decrease) in market value adjustment to derivatives	5,806		(17,926)

Increase in limited partnership investment unfunded commitment	Increase in limited partnership investment unfunded commitment	—		6,929		Increase in limited partnership investment unfunded commitment	4,464		—
Noncash treasury stock reissuance	Noncash treasury stock reissuance	1,947		2,042		Noncash treasury stock reissuance	1,966		1,947
Net assets acquired through acquisition						Net assets acquired through acquisition	69,778		—

Unsettled treasury stock repurchases		—		680
Proceeds from death benefit on bank owned life insurance not received	Proceeds from death benefit on bank owned life insurance not received	—		(384)		Proceeds from death benefit on bank owned life insurance not received	103		397

Note 5 Earnings per Share

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


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Weighted average common shares issued	Weighted average common shares issued	113,914,902		113,914,902		113,914,902		113,914,902		Weighted average common shares issued		120,266,238		113,914,902
Average treasury stock shares	Average treasury stock shares	(20,485,573)		(18,103,611)		(19,938,539)		(17,840,694)		Average treasury stock shares		(20,498,898)		(19,654,309)
Average deferred compensation shares	Average deferred compensation shares	(55,751)		(55,615)		(55,716)		(55,581)		Average deferred compensation shares		(55,821)		(55,684)
Average unearned nonvested shares	Average unearned nonvested shares	(178,724)		(139,255)		(159,287)		(134,759)		Average unearned nonvested shares		(150,688)		(126,210)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share	Weighted average common shares and common stock equivalents used to calculate basic earnings per share	93,194,854		95,616,421		93,761,360		95,883,868		Weighted average common shares and common stock equivalents used to calculate basic earnings per share		99,560,831		94,078,699
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share	Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share	199,620		220,268		177,013		191,119		Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share		163,133		176,913
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	55,785		55,615		55,785		55,615		Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share		55,852		55,712

Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	93,450,259		95,892,304		93,994,158		96,130,602		Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		99,779,816		94,311,324
Per Share Data:										Per Share Data:
Basic Earnings per Share	Basic Earnings per Share	$	0.36	$	0.36	$	0.99	$	1.08	Basic Earnings per Share		$	0.30	$	0.29
Diluted Earnings per Share	Diluted Earnings per Share	$	0.36	$	0.36	$	0.98	$	1.08	Diluted Earnings per Share		$	0.30	$	0.29

The following table shows the number of shares and the price per share related to common stock equivalents that were not included in the computation of diluted earnings per share for the ~~nine~~three months ended ~~September 30~~March 31, because to do so would have been antidilutive.


		2022					2021						2023					2022
			Price Range					Price Range						Price Range					Price Range
		Shares	From		To		Shares	From		To			Shares	From		To		Shares	From		To

Restricted Stock	Restricted Stock	148,423	$	12.77	$	16.43	111,589	$	12.77	$	14.58	Restricted Stock	139,476	$	12.77	$	16.43	23,621	$	15.81	$	16.25
Restricted Stock Units	Restricted Stock Units	24,529	$	21.08	$	21.08	29,547	$	16.41	$	16.41	Restricted Stock Units	17,667	$	17.53	$	17.53	12,793	$	21.08	$	21.08

1214

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:~~at the date shown below:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(dollars in thousands)					(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:	Financial instruments whose contract amounts represent credit risk:					Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	Commitments to extend credit	$	2,339,238	$	2,353,991	Commitments to extend credit	$	2,478,090	$	2,356,539
Financial standby letters of credit	Financial standby letters of credit	17,234		18,824		Financial standby letters of credit	19,676		18,417
Performance standby letters of credit	Performance standby letters of credit	15,408		10,663		Performance standby letters of credit	13,401		12,853
Commercial letters of credit	Commercial letters of credit	171		975		Commercial letters of credit	886		573

The notional amounts outstanding as of ~~September 30, 2022~~March 31, 2023 include amounts issued in ~~2022~~2023 of ~~$6.1~~$0.1 million in performance ~~standby letters of credit and $0.6 million in financial~~ standby letters of credit. There were no financial standby letters of credit or commercial letters of credit issued in ~~2022.~~2023. A liability of $0.1 million has been recorded as of both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, which represents the estimated fair value of letters of credit issued. The fair value of letters of credit is estimated based on the unrecognized portion of fees received at the time the commitment was issued.

Unused commitments and letters of credit provide exposure to future credit loss in the event of nonperformance by the borrower or guaranteed parties. Management’s evaluation of the credit risk related to these commitments resulted in the recording of a liability of ~~$9.7~~$8.2 million and ~~$6.4~~$10.0 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporates the expected loss percentage calculated for comparable loan categories as part of the allowance for credit losses for loans as well as estimated utilization for each loan category.

Legal Proceedings

First Commonwealth and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. As of ~~September 30, 2022,~~March 31, 2023, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against First Commonwealth or its subsidiaries will be material to First Commonwealth’s consolidated financial position. On at least a quarterly basis, First Commonwealth assesses its liabilities and contingencies in connection with such legal proceedings. For those matters where it is probable that First Commonwealth will incur losses and the amounts of the losses can be reasonably estimated, First Commonwealth records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability (if any), is between $0 and $1 million. Although First Commonwealth does not believe that the outcome of pending litigation will be material to First Commonwealth’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations and cash flows for a particular reporting period in the future.

1315

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 Investment Securities

Securities Available for Sale

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


		September 30, 2022								December 31, 2021									March 31, 2023								December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			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)																	(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:																	Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	$	4,456	$	65	$	(232)	$	4,289	$	5,242	$	420	$	—	$	5,662	Mortgage-Backed Securities – Residential	$	3,995	$	45	$	(144)	$	3,896	$	4,127	$	37	$	(181)	$	3,983
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	334,730		—		(51,477)		283,253		365,024		1,725		(4,459)		362,290		Mortgage-Backed Securities – Commercial	319,133		—		(49,250)		269,883		324,306		—		(52,890)		271,416
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:																	Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	545,165		24		(83,676)		461,513		632,687		6,308		(9,021)		629,974		Mortgage-Backed Securities – Residential	512,277		72		(72,106)		440,243		527,777		59		(78,847)		448,989

Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	1,000		—		(127)		873		1,000		—		(19)		981		Other Government-Sponsored Enterprises	1,000		—		(107)		893		1,000		—		(118)		882
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	9,494		—		(1,322)		8,172		9,538		89		(103)		9,524		Obligations of States and Political Subdivisions	9,479		1		(1,075)		8,405		9,482		—		(1,295)		8,187
Corporate Securities	Corporate Securities	32,030		161		(2,876)		29,315		32,088		973		(112)		32,949		Corporate Securities	30,414		20		(3,141)		27,293		32,010		179		(2,985)		29,204

Total Securities Available for Sale	Total Securities Available for Sale	$	926,875	$	250	$	(139,710)	$	787,415	$	1,045,579	$	9,515	$	(13,714)	$	1,041,380	Total Securities Available for Sale	$	876,298	$	138	$	(125,823)	$	750,613	$	898,702	$	275	$	(136,316)	$	762,661

Mortgage-backed securities include mortgage-backed obligations of U.S. Government agencies and obligations of U.S. Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to approximately 3040 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.

1416

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amortized cost and estimated fair value of debt securities available for sale at ~~September 30, 2022,~~March 31, 2023, by contractual maturity, are shown below.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(dollars in thousands)					(dollars in thousands)
Due within 1 year	Due within 1 year	$	4,999	$	4,985	Due within 1 year	$	5,998	$	5,888
Due after 1 but within 5 years	Due after 1 but within 5 years	8,880		8,611		Due after 1 but within 5 years	2,885		2,763
Due after 5 but within 10 years	Due after 5 but within 10 years	28,645		24,764		Due after 5 but within 10 years	32,010		27,940
Due after 10 years	Due after 10 years	—		—		Due after 10 years	—		—
		42,524		38,360			40,893		36,591
Mortgage-Backed Securities (a)	Mortgage-Backed Securities (a)	884,351		749,055		Mortgage-Backed Securities (a)	835,405		714,022
Total Debt Securities	Total Debt Securities	$	926,875	$	787,415	Total Debt Securities	$	876,298	$	750,613

(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 ~~$339.2~~$323.1 million and a fair value of ~~$287.5~~$273.8 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of ~~$545.2~~$512.3 million and a fair value of ~~$461.5~~$440.2 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 ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021			2023		2022
		(dollars in thousands)					(dollars in thousands)
Proceeds from sales	Proceeds from sales	$	—	$	—	Proceeds from sales	$	30,686	$	—
Gross gains (losses) realized:	Gross gains (losses) realized:					Gross gains (losses) realized:
Sales transactions:	Sales transactions:					Sales transactions:
Gross gains	Gross gains	$	—	$	—	Gross gains	$	—	$	—
Gross losses	Gross losses	—		—		Gross losses	—		—
		—		—			—		—
Maturities	Maturities					Maturities
Gross gains	Gross gains	2		16		Gross gains	—		2
Gross losses	Gross losses	—		—		Gross losses	—		—

		2		16			—		2
Net gains	Net gains	$	2	$	16	Net gains	$	—	$	2

Proceeds from sales included in above table are a result of the sale of investments acquired as part of the Centric acquisition. The securities were recorded at fair value at the time of acquisition and subsequently sold at the same value.

Securities available for sale with an estimated fair value of ~~$647.9~~$431.0 million and ~~$759.1~~$626.7 million were pledged as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, to secure public deposits and for other purposes required or permitted by law.

1517

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Securities Held to Maturity

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


		September 30, 2022								December 31, 2021									March 31, 2023								December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			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)																	(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:																	Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	$	2,029	$	—	$	(240)	$	1,789	$	2,409	$	101	$	—	$	2,510	Mortgage-Backed Securities – Residential	$	1,907	$	—	$	(181)	$	1,726	$	2,008	$	—	$	(224)	$	1,784
Mortgage-Backed Securities- Commercial	Mortgage-Backed Securities- Commercial	77,896		—		(14,224)		63,672		91,439		305		(1,939)		89,805		Mortgage-Backed Securities- Commercial	74,052		—		(13,162)		60,890		75,229		—		(14,196)		61,033
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:																	Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	338,959		—		(56,872)		282,087		387,848		2,800		(5,758)		384,890		Mortgage-Backed Securities – Residential	321,247		—		(49,529)		271,718		329,267		—		(53,002)		276,265
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	5,434		—		(123)		5,311		7,309		148		—		7,457		Mortgage-Backed Securities – Commercial	4,137		—		(89)		4,048		4,794		—		(129)		4,665
Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	22,141		—		(4,756)		17,385		21,904		—		(625)		21,279		Other Government-Sponsored Enterprises	22,301		—		(4,238)		18,063		22,221		—		(4,501)		17,720
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	27,331		—		(3,377)		23,954		29,402		414		(103)		29,713		Obligations of States and Political Subdivisions	26,634		1		(2,289)		24,346		26,643		—		(2,865)		23,778
Debt Securities Issued by Foreign Governments	Debt Securities Issued by Foreign Governments	1,000		—		(38)		962		1,000		—		(3)		997		Debt Securities Issued by Foreign Governments	1,000		—		(50)		950		1,000		—		(40)		960

Total Securities Held to Maturity	Total Securities Held to Maturity	$	474,790	$	—	$	(79,630)	$	395,160	$	541,311	$	3,768	$	(8,428)	$	536,651	Total Securities Held to Maturity	$	451,278	$	1	$	(69,538)	$	381,741	$	461,162	$	—	$	(74,957)	$	386,205

The amortized cost and estimated fair value of debt securities held to maturity at ~~September 30, 2022,~~March 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(dollars in thousands)					(dollars in thousands)
Due within 1 year	Due within 1 year	$	611	$	611	Due within 1 year	$	1,145	$	1,145
Due after 1 but within 5 years	Due after 1 but within 5 years	8,236		7,875		Due after 1 but within 5 years	9,816		9,462
Due after 5 but within 10 years	Due after 5 but within 10 years	41,062		33,416		Due after 5 but within 10 years	38,411		32,299
Due after 10 years	Due after 10 years	563		399		Due after 10 years	563		453
		50,472		42,301			49,935		43,359
Mortgage-Backed Securities (a)	Mortgage-Backed Securities (a)	424,318		352,859		Mortgage-Backed Securities (a)	401,343		338,382
Total Debt Securities	Total Debt Securities	$	474,790	$	395,160	Total Debt Securities	$	451,278	$	381,741

~~(b)~~(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 ~~$79.9~~$76.0 million and a fair value of ~~$65.5~~$62.6 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of ~~$344.4~~$325.4 million and a fair value of ~~$287.4~~$275.8 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 ~~$340.9~~$115.9 million and ~~$313.9~~$368.8 million were pledged as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, to secure public deposits and for other purposes required or permitted by law.

Other Investments

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

1618

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our FHLB stock totaled ~~$14.3~~$30.0 million and ~~$11.7~~$25.2 million, respectively, and is included in “Other investments” on the unaudited Consolidated Statements of Financial Condition.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

As of both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, "Other investments" also includes $6.2 million and $1.2 million, respectively, in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ there were no gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.

Impairment of Investment Securities

We review our investment portfolio on a quarterly basis for indications of impairment. For available for sale securities, the

review includes analyzing the financial condition and near-term prospects of the issuer, including any specific events which

may influence the operations of the issuer and whether we are more likely than not to sell the security. We evaluate whether we

are more likely than not to sell debt securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. Held-to-maturity securities are

evaluated for impairment on a quarterly basis using historical probability of default and loss given default information specific

to the investment category. If this evaluation determines that credit losses exist an allowance for credit loss is recorded and

included in earnings as a component of credit loss expense.

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

The following table presents the gross unrealized losses and estimated fair values at ~~September 30, 2022~~March 31, 2023 for both available for sale and held to maturity securities by investment category and time frame for which securities have been in a continuous unrealized loss position:


		Less Than 12 Months				12 Months or More				Total						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			Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
		(dollars in thousands)										(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:														Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	$	3,845	$	(472)	$	—	$	—	$	3,845		$	(472)	Mortgage-Backed Securities – Residential	$	—	$	—	$	3,639	$	(325)	$	3,639	$	(325)
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	188,467		(30,122)		158,458		(35,579)		346,925			(65,701)		Mortgage-Backed Securities – Commercial	7,076		(232)		323,697		(62,180)		330,773		(62,412)
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:														Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	292,688		(33,319)		448,625		(107,229)		741,313			(140,548)		Mortgage-Backed Securities – Residential	15,351		(551)		693,339		(121,084)		708,690		(121,635)
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	5,311		(123)		—		—		5,311			(123)		Mortgage-Backed Securities – Commercial	4,048		(89)		—		—		4,048		(89)
Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	—		—		18,258		(4,883)		18,258			(4,883)		Other Government-Sponsored Enterprises	—		—		18,956		(4,345)		18,956		(4,345)
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	24,485		(3,081)		7,166		(1,618)		31,651			(4,699)		Obligations of States and Political Subdivisions	8,458		(163)		20,802		(3,201)		29,260		(3,364)
Debt Securities Issued by Foreign Governments	Debt Securities Issued by Foreign Governments	962		(38)		—		—		962			(38)		Debt Securities Issued by Foreign Governments	197		(4)		554		(46)		751		(50)
Corporate Securities	Corporate Securities	23,004		(1,991)		4,167		(885)		27,171			(2,876)		Corporate Securities	12,621		(799)		12,660		(2,342)		25,281		(3,141)

Total Securities	Total Securities	$	538,762	$	(69,146)	$	636,674	$	(150,194)	$	1,175,436		$	(219,340)	Total Securities	$	47,751	$	(1,838)	$	1,073,647	$	(193,523)	$	1,121,398	$	(195,361)

At ~~September 30, 2022,~~March 31, 2023, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised 96% of total unrealized losses. All unrealized losses are the result of changes in market interest rates. At ~~September 30, 2022,~~March 31, 2023, there are ~~218~~202 debt securities in an unrealized loss position.

1719

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, ~~2021~~2022 by investment category and the time frame for which securities have been in a continuous unrealized loss position:


		Less Than 12 Months				12 Months or More				Total						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			Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
		(dollars in thousands)										(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:														Obligations of U.S. Government Agencies:

Mortgage-Backed Securities – Residential															Mortgage-Backed Securities – Residential	$	3,734	$	(405)	$	—	$	—	$	3,734	$	(405)
Mortgage-Backed Securities - Commercial	Mortgage-Backed Securities - Commercial	$	320,414	$	(6,398)	$	—	$	—	$	320,414		$	(6,398)	Mortgage-Backed Securities - Commercial	92,208		(12,364)		240,241		(54,722)		332,449		(67,086)
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:														Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	658,965		(14,779)		—		—		658,965			(14,779)		Mortgage-Backed Securities – Residential	239,760		(21,543)		482,195		(110,306)		721,955		(131,849)

Mortgage-Backed Securities – Commercial															Mortgage-Backed Securities – Commercial	4,666		(129)		—		—		4,666		(129)
Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	22,261		(644)		—		—		22,261			(644)		Other Government-Sponsored Enterprises	—		—		18,603		(4,619)		18,603		(4,619)
Obligation of States and Political Subdivisions	Obligation of States and Political Subdivisions	11,213		(206)		—		—		11,213			(206)		Obligation of States and Political Subdivisions	21,234		(1,979)		9,230		(2,181)		30,464		(4,160)
Debt Securities Issued by Foreign Governments	Debt Securities Issued by Foreign Governments	997		(3)		—		—		997			(3)		Debt Securities Issued by Foreign Governments	587		(13)		373		(27)		960		(40)
Corporate Securities	Corporate Securities	19,013		(112)		—		—		19,013			(112)		Corporate Securities	14,406		(590)		12,632		(2,395)		27,038		(2,985)

Total Securities	Total Securities	$	1,032,863	$	(22,142)	$	—	$	—	$	1,032,863		$	(22,142)	Total Securities	$	376,595	$	(37,023)	$	763,274	$	(174,250)	$	1,139,869	$	(211,273)

As of ~~September 30, 2022,~~March 31, 2023, our corporate securities had an amortized cost and an estimated fair value of ~~$32.0~~$30.4 million and ~~$29.3~~$27.3 million, respectively. As of December 31, ~~2021,~~2022, our corporate securities had an amortized cost and estimated fair value of ~~$32.1~~$32.0 million and ~~$32.9~~$29.2 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were ~~six~~seven and ~~four~~six corporate securities, respectively, in an unrealized loss position as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether the unrealized loss position is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.

There was no expected credit related impairment recognized on investment securities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

1820

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 ~~$5.2~~$6.7 million and ~~$0.8~~$5.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and discounts on purchased loans from acquisitions were ~~$5.5~~$33.5 million and ~~$6.0~~$5.4 million ~~September 30, 2022~~as of March 31, 2023 and December 31, ~~2021,~~2022, respectively. The following table provides outstanding balances related to each of our loan types:

September 30, 2022 December 31, 2021
(dollars in thousands)
Commercial, financial, agricultural and other $ 1,169,206 $ 1,173,452
Time and demand 1,012,169 1,159,524
Commercial credit cards 13,368 13,928
Equipment finance 43,777
Time and demand other 99,892
Real estate construction 422,690 494,456
Construction other 326,539
Construction residential 96,151
Residential real estate 2,153,904 1,920,250
Residential first lien 1,510,570 1,299,534
Residential junior lien/home equity 643,334 620,716
Commercial real estate 2,393,276 2,251,097
Multifamily 404,328 385,432
Nonowner occupied 1,516,255 1,465,247
Owner occupied 472,693 400,418
Loans to individuals 1,209,841 999,975
Automobile and recreational vehicles 1,120,838 901,280
Consumer credit cards 10,274 11,151
Consumer other 78,729 87,544
Total loans and leases $ 7,348,917 $ 6,839,230

In the table above, Commercial, financial, agricultural and other loans at September 30, 2022 and December 31, 2021 includes $4.9 million and $71.3 million, respectively, in Paycheck Protection Program ("PPP") loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. Although the Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liability to the Company associated with participation in the program.


	March 31, 2023		December 31, 2022

	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,471,079	$	1,211,706
Time and demand	1,254,315		1,023,824

Commercial credit cards	13,706		13,920
Equipment finance	109,221		79,674
Time and demand other	93,837		94,288
Real estate construction	541,902		513,101
Construction other	422,831		395,439
Construction residential	119,071		117,662
Residential real estate	2,323,867		2,194,669
Residential first lien	1,660,433		1,547,192
Residential junior lien/home equity	663,434		647,477
Commercial real estate	2,991,930		2,425,012
Multifamily	484,193		431,151
Nonowner occupied	1,817,453		1,510,347
Owner occupied	690,284		483,514
Loans to individuals	1,328,167		1,297,655
Automobile and recreational vehicles	1,244,874		1,210,451
Consumer credit cards	9,886		10,657
Consumer other	73,407		76,547
Total loans and leases	$	8,656,945	$	7,642,143

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

Commercial, financial, agricultural and other

Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. At March 31, 2023 and December 31, 2022, this category includes $5.3 million and $4.3 million in Paycheck Protection Program ("PPP") loans for small businesses. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans.

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

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~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. There were no equipment finance loans or leases in the portfolio prior to the first quarter of 2022.

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. Prior to the first quarter of 2022, these loans were included in the Time and Demand category. The breakout into a separate category is the result of an annual review of the peer group loss history and loss drivers used in the allowance for credit losses model.

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. Prior to the first quarter of 2022, all construction loans were included in one loan category. The breakout into separate construction categories is the result of an annual review of the peer group loss history and loss drivers used in the allowance for credit losses model.

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. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, national unemployment replaced rental vacancy as one of the primary macroeconomic drivers in this category.

Nonowner Occupied - Consists of loans secured by commercial real estate non-owner occupied 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 commercial real estate owner occupied 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.

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, retail sales replaced household debt as one of the primary macroeconomic factors for this category.

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was ~~3.70%~~3.47% and during the one-year forecast period it was projected to average ~~4.57%~~4.42%, with a peak of ~~4.89%~~4.84%. Current forecast assumptions consider the impact of rising interest rates, global oil prices and supply chain disruption, inflation, Russia's invasion of Ukraine and the potential effects of these on the US economy.

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.

2123

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables represent our credit risk profile by creditworthiness:

September 30, 2022
Non-Pass
Pass OAEM Substandard Doubtful Loss Total Non-Pass Total
(dollars in thousands)
Commercial, financial, agricultural and other $ 1,123,075 $ 33,998 $ 12,133 $ — $ — $ 46,131 $ 1,169,206
Time and demand 966,079 33,998 12,092 — — 46,090 1,012,169
Commercial credit cards 13,368 — — — — — 13,368
Equipment finance 43,777 — — — — — 43,777
Time and demand other 99,851 — 41 — — 41 99,892
Real estate construction 422,690 — — — — — 422,690
Construction other 326,539 — — — — — 326,539
Construction residential 96,151 — — — — — 96,151
Residential real estate 2,147,081 804 6,019 — — 6,823 2,153,904
Residential first lien 1,506,421 740 3,409 — — 4,149 1,510,570
Residential junior lien/home equity 640,660 64 2,610 — — 2,674 643,334
Commercial real estate 2,307,356 58,800 27,120 — — 85,920 2,393,276
Multifamily 403,777 496 55 — — 551 404,328
Nonowner occupied 1,440,168 53,980 22,107 — — 76,087 1,516,255
Owner occupied 463,411 4,324 4,958 — — 9,282 472,693
Loans to individuals 1,209,457 — 384 — — 384 1,209,841
Automobile and recreational vehicles 1,120,521 — 317 — — 317 1,120,838
Consumer credit cards 10,274 — — — — — 10,274
Consumer other 78,662 — 67 — — 67 78,729
Total loans and leases $ 7,209,659 $ 93,602 $ 45,656 $ — $ — $ 139,258 $ 7,348,917

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

December 31, 2021
Non-Pass
Pass OAEM Substandard Doubtful Loss Total Non-Pass Total
(dollars in thousands)
Commercial, financial, agricultural and other $ 1,121,234 $ 33,765 $ 18,453 $ — $ — $ 52,218 $ 1,173,452
Time and demand 1,107,306 33,765 18,453 — — 52,218 1,159,524
Commercial credit cards 13,928 — — — — — 13,928
Real estate construction 493,913 498 45 — — 543 494,456
Residential real estate 1,913,064 976 6,210 — — 7,186 1,920,250
Residential first lien 1,295,524 905 3,105 — — 4,010 1,299,534
Residential junior lien/home equity 617,540 71 3,105 — — 3,176 620,716
Commercial real estate 2,113,123 85,324 52,650 — — 137,974 2,251,097
Multifamily 355,702 14,565 15,165 — — 29,730 385,432
Nonowner occupied 1,368,922 63,783 32,542 — — 96,325 1,465,247
Owner occupied 388,499 6,976 4,943 — — 11,919 400,418
Loans to individuals 999,770 — 205 — — 205 999,975
Automobile and recreational vehicles 901,132 — 148 — — 148 901,280
Consumer credit cards 11,151 — — — — — 11,151
Consumer other 87,487 — 57 — — 57 87,544
Total loans and leases $ 6,641,104 $ 120,563 $ 77,563 $ — $ — $ 198,126 $ 6,839,230

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

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

September 30, 2022
Term Loans Revolving Loans
2022 2021 2020 2019 2018 Prior Total
(dollars in thousands)
Time and demand $ 151,625 $ 166,338 $ 69,788 $ 94,503 $ 66,019 $ 62,843 $ 401,053 $ 1,012,169
Pass 151,625 157,344 60,402 85,295 65,892 61,385 384,136 966,079
OAEM — 8,586 8,786 2,138 46 597 13,845 33,998
Substandard — 408 600 7,070 81 861 3,072 12,092
Commercial credit cards — — — — — — 13,368 13,368
Pass — — — — — — 13,368 13,368
Equipment finance 43,777 — — — — — — 43,777
Pass 43,777 — — — — — — 43,777
Time and demand other 5,835 20,287 20,851 4,024 2,925 41,637 4,333 99,892
Pass 5,835 20,287 20,851 4,024 2,925 41,596 4,333 99,851
Substandard — — — — — 41 — 41
Construction other 41,792 134,773 81,657 42,998 23,951 1,082 286 326,539
Pass 41,792 134,773 81,657 42,998 23,951 1,082 286 326,539
Construction residential 44,079 52,020 — 32 18 — 2 96,151
Pass 44,079 52,020 — 32 18 — 2 96,151
OAEM — — — — — — — —
Residential first lien 228,085 490,963 344,244 105,769 72,054 267,696 1,759 1,510,570
Pass 228,085 490,580 344,228 105,244 71,453 265,149 1,682 1,506,421
OAEM — 175 — 136 55 297 77 740
Substandard — 208 16 389 546 2,250 — 3,409
Residential junior lien/home equity 60,751 51,084 1,574 2,718 1,808 4,600 520,799 643,334
Pass 60,751 51,084 1,574 2,648 1,808 4,462 518,333 640,660
OAEM — — — — — 54 10 64
Substandard — — — 70 — 84 2,456 2,610
Multifamily 107,522 89,935 61,212 42,617 20,040 81,620 1,382 404,328
Pass 107,522 89,935 61,212 42,617 20,040 81,069 1,382 403,777
OAEM — — — — — 496 — 496
Substandard — — — — — 55 — 55
Nonowner occupied 234,038 168,018 108,037 216,851 151,080 633,344 4,887 1,516,255
Pass 234,038 168,018 108,037 216,851 114,601 594,896 3,727 1,440,168
OAEM — — — — 28,643 24,335 1,002 53,980
Substandard — — — — 7,836 14,113 158 22,107
Owner occupied 93,475 98,472 58,582 46,871 27,587 141,869 5,837 472,693
Pass 93,475 98,449 56,345 45,159 26,677 137,581 5,725 463,411
OAEM — — 1,252 876 836 1,327 33 4,324
Substandard — 23 985 836 74 2,961 79 4,958
Automobile and recreational vehicles 464,203 356,266 188,208 79,358 25,839 6,964 — 1,120,838
Pass 464,203 356,264 188,112 79,240 25,770 6,932 — 1,120,521
Substandard — 2 96 118 69 32 — 317
Consumer credit cards — — — — — — 10,274 10,274
Pass — — — — — — 10,274 10,274
Consumer other 5,229 18,003 2,873 4,690 2,390 4,390 41,154 78,729
Pass 5,229 18,003 2,873 4,681 2,390 4,385 41,101 78,662
Substandard — — — 9 — 5 53 67
Total $ 1,480,411 $ 1,646,159 $ 937,026 $ 640,431 $ 393,711 $ 1,246,045 $ 1,005,134 $ 7,348,917


	March 31, 2023
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,368,580	$	63,654	$	38,845	$	—	$	—	$	102,499	$	1,471,079
Time and demand	1,152,045		63,654		38,616		—		—		102,270		1,254,315
Commercial credit cards	13,706		—		—		—		—		—		13,706
Equipment finance	109,020		—		201		—		—		201		109,221
Time and demand other	93,809		—		28		—		—		28		93,837
Real estate construction	540,264		1,638		—		—		—		1,638		541,902
Construction other	421,193		1,638		—		—		—		1,638		422,831
Construction residential	119,071		—		—		—		—		—		119,071
Residential real estate	2,313,412		2,119		8,336		—		—		10,455		2,323,867
Residential first lien	1,654,259		2,119		4,055		—		—		6,174		1,660,433
Residential junior lien/home equity	659,153		—		4,281		—		—		4,281		663,434
Commercial real estate	2,917,078		45,500		29,352		—		—		74,852		2,991,930
Multifamily	483,668		479		46		—		—		525		484,193
Nonowner occupied	1,765,458		28,201		23,794		—		—		51,995		1,817,453
Owner occupied	667,952		16,820		5,512		—		—		22,332		690,284
Loans to individuals	1,327,738		—		429		—		—		429		1,328,167
Automobile and recreational vehicles	1,244,519		—		355		—		—		355		1,244,874
Consumer credit cards	9,886		—		—		—		—		—		9,886
Consumer other	73,333		—		74		—		—		74		73,407
Total loans and leases	$	8,467,072	$	112,911	$	76,962	$	—	$	—	$	189,873	$	8,656,945

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021
Term Loans Revolving Loans
2021 2020 2019 2018 2017 Prior Total
(dollars in thousands)
Time and demand $ 281,244 $ 126,403 $ 143,030 $ 91,118 $ 45,442 $ 111,127 $ 361,160 $ 1,159,524
Pass 280,854 125,728 128,080 83,204 31,472 102,399 355,569 1,107,306
OAEM 390 596 1,125 7,780 13,945 7,126 2,803 33,765
Substandard — 79 13,825 134 25 1,602 2,788 18,453
Commercial credit cards — — — — — — 13,928 13,928
Pass — — — — — — 13,928 13,928
Real estate construction 202,016 129,298 123,153 38,267 441 841 440 494,456
Pass 201,992 128,824 123,153 38,267 441 796 440 493,913
OAEM 24 474 — — — — — 498
Substandard — — — — — 45 — 45
Residential first lien 376,106 375,904 126,788 84,484 74,268 260,010 1,974 1,299,534
Pass 376,095 375,885 126,618 84,079 74,135 256,815 1,897 1,295,524
OAEM — — — 67 — 761 77 905
Substandard 11 19 170 338 133 2,434 — 3,105
Residential junior lien/home equity 56,861 1,999 3,322 2,684 1,009 5,348 549,493 620,716
Pass 56,861 1,999 3,246 2,684 1,009 5,195 546,546 617,540
OAEM — — — — — 61 10 71
Substandard — — 76 — — 92 2,937 3,105
Multifamily 90,062 73,068 16,782 36,523 63,872 103,774 1,351 385,432
Pass 90,062 73,068 16,782 21,846 49,832 102,761 1,351 355,702
OAEM — — — — 14,040 525 — 14,565
Substandard — — — 14,677 — 488 — 15,165
Nonowner occupied 194,137 98,840 202,236 173,053 177,295 615,943 3,743 1,465,247
Pass 194,137 98,840 202,236 155,293 152,174 563,743 2,499 1,368,922
OAEM — — — 3,723 19,235 39,737 1,088 63,783
Substandard — — — 14,037 5,886 12,463 156 32,542
Owner occupied 77,710 62,380 53,954 34,115 32,989 134,713 4,557 400,418
Pass 77,710 59,973 51,513 33,623 31,644 129,593 4,443 388,499
OAEM — 2,194 1,220 492 1,321 1,716 33 6,976
Substandard — 213 1,221 — 24 3,404 81 4,943
Automobile and recreational vehicles 456,730 252,518 122,943 48,375 17,230 3,484 — 901,280
Pass 456,730 252,518 122,867 48,361 17,224 3,432 — 901,132
Substandard — — 76 14 6 52 — 148
Consumer credit cards — — — — — — 11,151 11,151
Pass — — — — — — 11,151 11,151
Consumer other 22,156 4,655 8,030 5,084 542 5,503 41,574 87,544
Pass 22,156 4,655 8,030 5,084 542 5,460 41,560 87,487
Substandard — — — — — 43 14 57
Total $ 1,757,022 $ 1,125,065 $ 800,238 $ 513,703 $ 413,088 $ 1,240,743 $ 989,371 $ 6,839,230


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

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


	March 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Time and demand	$	48,152	$	229,873	$	173,699	$	84,221	$	92,893	$	108,814	$	516,663	$	1,254,315
Pass	48,152		215,243		163,441		73,274		82,030		104,781		465,124		1,152,045
OAEM	—		14,630		2,806		1,547		1,604		1,224		41,843		63,654
Substandard	—		—		7,452		9,400		9,259		2,809		9,696		38,616
Gross charge-offs	—		—		—		—		—		(14)		(241)		(255)
Gross recoveries	—		—		—		34		4		78		—		116
Commercial credit cards	—		—		—		—		—		—		13,706		13,706
Pass	—		—		—		—		—		—		13,706		13,706


Gross charge-offs	—		—		—		—		—		—		(26)		(26)
Gross recoveries	—		—		—		—		—		—		2		2

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2023
	Term Loans						Revolving Loans
	2023	2022	2021	2020	2019	Prior		Total
	(dollars in thousands)
Equipment finance	33,014	76,207	—	—	—	—	—	109,221
Pass	33,014	76,006	—	—	—	—	—	109,020

Substandard	—	201	—	—	—	—	—	201
Gross charge-offs	—	(45)	—	—	—	—	—	(45)
Gross recoveries	—	—	—	—	—	—	—	—
Time and demand other	2,251	5,879	19,698	20,130	3,624	39,653	2,602	93,837
Pass	2,251	5,879	19,698	20,130	3,624	39,625	2,602	93,809

Substandard	—	—	—	—	—	28	—	28
Gross charge-offs	—	—	—	—	—	—	(337)	(337)
Gross recoveries	—	—	—	—	—	—	41	41
Construction other	2,156	117,145	201,349	65,640	21,922	14,310	309	422,831
Pass	2,156	117,145	199,711	65,640	21,922	14,310	309	421,193
OAEM	—	—	1,638	—	—	—	—	1,638

Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Construction residential	1,842	103,518	4,429	5,376	3,208	—	698	119,071
Pass	1,842	103,518	4,429	5,376	3,208	—	698	119,071


Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	26,936	300,936	559,299	339,378	102,937	328,714	2,233	1,660,433
Pass	26,936	300,872	557,367	339,288	102,120	325,707	1,969	1,654,259
OAEM	—	—	1,571	—	130	341	77	2,119
Substandard	—	64	361	90	687	2,666	187	4,055
Gross charge-offs	—	(1)	—	(4)	(1)	(10)	—	(16)
Gross recoveries	—	—	—	—	—	26	—	26
Residential junior lien/home equity	10,373	77,342	49,009	1,563	3,220	6,260	515,667	663,434
Pass	10,373	77,342	49,009	1,563	3,155	6,181	511,530	659,153

Substandard	—	—	—	—	65	79	4,137	4,281
Gross charge-offs	—	—	—	—	—	—	(63)	(63)
Gross recoveries	—	—	—	—	—	1	11	12
Multifamily	1,863	154,628	101,627	79,771	32,764	111,833	1,707	484,193
Pass	1,863	154,628	101,627	79,771	32,764	111,308	1,707	483,668
OAEM	—	—	—	—	—	479	—	479
Substandard	—	—	—	—	—	46	—	46
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Nonowner occupied	37,368	401,997	214,359	163,827	247,824	742,094	9,984	1,817,453
Pass	37,368	401,523	214,359	159,321	246,350	697,715	8,822	1,765,458
OAEM	—	—	—	4,506	1,474	21,219	1,002	28,201
Substandard	—	474	—	—	—	23,160	160	23,794
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	38	—	38





Owner occupied	23,235	163,650	140,176	95,510	67,131	190,969	9,613	690,284
Pass	23,235	163,055	139,972	88,836	56,667	186,685	9,502	667,952
OAEM	—	595	182	5,089	9,798	1,123	33	16,820
Substandard	—	—	22	1,585	666	3,161	78	5,512
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	4	—	4

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Automobile and recreational vehicles	129,646		575,915		304,240		157,298		59,302		18,473		—		1,244,874
Pass	129,646		575,889		304,197		157,204		59,184		18,399		—		1,244,519

Substandard	—		26		43		94		118		74		—		355
Gross charge-offs	—		(266)		(199)		(196)		(102)		(39)		—		(802)
Gross recoveries	—		60		80		92		98		60		—		390
Consumer credit cards	—		—		—		—		—		—		9,886		9,886
Pass	—		—		—		—		—		—		9,886		9,886


Gross charge-offs	—		—		—		—		—		—		(66)		(66)
Gross recoveries	—		—		—		—		—		—		17		17
Consumer other	1,792		5,998		16,226		2,185		2,943		4,818		39,445		73,407
Pass	1,792		5,998		16,226		2,185		2,924		4,814		39,394		73,333

Substandard	—		—		—		—		19		4		51		74
Gross charge-offs	—		(44)		(27)		(3)		(19)		(6)		(174)		(273)
Gross recoveries	—		—		—		1		4		18		41		64
Total loans and leases	$	318,628	$	2,213,088	$	1,784,111	$	1,014,899	$	637,768	$	1,565,938	$	1,122,513	$	8,656,945
Total charge-offs	—		(356)		(226)		(203)		(122)		(69)		(907)		(1,883)
Total recoveries	—		60		80		127		106		225		112		710

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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


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


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

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


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


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

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


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

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Portfolio Risks

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

Total net charge-offs for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ were ~~$5.1~~$1.2 million and ~~$9.5~~$1.1 million, respectively.

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.


		September 30, 2022															March 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			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)															(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	241	$	—	$	4	$	2,805	$	3,050	$	1,166,156	$	1,169,206	Commercial, financial, agricultural and other	$	1,470	$	311	$	551	$	12,364	$	14,696	$	1,456,383	$	1,471,079
Time and demand	Time and demand	228		—		—		2,805		3,033		1,009,136		1,012,169		Time and demand	1,462		293		548		12,163		14,466		1,239,849		1,254,315
Commercial credit cards	Commercial credit cards	11		—		—		—		11		13,357		13,368		Commercial credit cards	6		18		1		—		25		13,681		13,706
Equipment finance	Equipment finance	—		—		—		—		—		43,777		43,777		Equipment finance	—		—		—		201		201		109,020		109,221
Time and demand other	Time and demand other	2		—		4		—		6		99,886		99,892		Time and demand other	2		—		2		—		4		93,833		93,837
Real estate construction	Real estate construction	—		—		—		—		—		422,690		422,690		Real estate construction	833		—		—		—		833		541,069		541,902
Construction other	Construction other	—		—		—		—		—		326,539		326,539		Construction other	—		—		—		—		—		422,831		422,831
Construction residential	Construction residential	—		—		—		—		—		96,151		96,151		Construction residential	833		—		—		—		833		118,238		119,071
Residential real estate	Residential real estate	2,794		937		821		5,530		10,082		2,143,822		2,153,904		Residential real estate	3,787		1,821		280		7,655		13,543		2,310,324		2,323,867
Residential first lien	Residential first lien	1,914		474		487		3,102		5,977		1,504,593		1,510,570		Residential first lien	1,934		1,188		61		3,543		6,726		1,653,707		1,660,433
Residential junior lien/home equity	Residential junior lien/home equity	880		463		334		2,428		4,105		639,229		643,334		Residential junior lien/home equity	1,853		633		219		4,112		6,817		656,617		663,434
Commercial real estate	Commercial real estate	372		29		—		20,757		21,158		2,372,118		2,393,276		Commercial real estate	4,623		21		—		23,786		28,430		2,963,500		2,991,930
Multifamily	Multifamily	73		—		—		—		73		404,255		404,328		Multifamily	68		—		—		—		68		484,125		484,193
Nonowner occupied	Nonowner occupied	93		—		—		19,808		19,901		1,496,354		1,516,255		Nonowner occupied	1,941		—		—		21,111		23,052		1,794,401		1,817,453
Owner occupied	Owner occupied	206		29		—		949		1,184		471,509		472,693		Owner occupied	2,614		21		—		2,675		5,310		684,974		690,284
Loans to individuals	Loans to individuals	2,622		862		723		384		4,591		1,205,250		1,209,841		Loans to individuals	2,141		802		609		429		3,981		1,324,186		1,328,167
Automobile and recreational vehicles	Automobile and recreational vehicles	2,129		477		285		317		3,208		1,117,630		1,120,838		Automobile and recreational vehicles	1,786		586		205		355		2,932		1,241,942		1,244,874
Consumer credit cards	Consumer credit cards	44		39		—		—		83		10,191		10,274		Consumer credit cards	41		40		—		—		81		9,805		9,886
Consumer other	Consumer other	449		346		438		67		1,300		77,429		78,729		Consumer other	314		176		404		74		968		72,439		73,407
Total loans and leases	Total loans and leases	$	6,029	$	1,828	$	1,548	$	29,476	$	38,881	$	7,310,036	$	7,348,917	Total loans and leases	$	12,854	$	2,955	$	1,440	$	44,234	$	61,483	$	8,595,462	$	8,656,945

2629

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2021															December 31, 2022
		30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total			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)															(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	633	$	987	$	155	$	2,006	$	3,781	$	1,169,671	$	1,173,452	Commercial, financial, agricultural and other	$	1,233	$	279	$	355	$	2,374	$	4,241	$	1,207,465	$	1,211,706
Time and demand	Time and demand	605		972		144		2,006		3,727		1,155,797		1,159,524		Time and demand	1,121		270		352		2,374		4,117		1,019,707		1,023,824
Commercial credit cards	Commercial credit cards	28		15		11		—		54		13,874		13,928		Commercial credit cards	27		9		—		—		36		13,884		13,920
Equipment finance																Equipment finance	—		—		—		—		—		79,674		79,674
Time and demand other																Time and demand other	85		—		3		—		88		94,200		94,288
Real estate construction	Real estate construction	813		—		448		45		1,306		493,150		494,456		Real estate construction	502		—		—		—		502		512,599		513,101
Construction other																Construction other	—		—		—		—		—		395,439		395,439
Construction residential																Construction residential	502		—		—		—		502		117,160		117,662
Residential real estate	Residential real estate	3,393		983		218		5,608		10,202		1,910,048		1,920,250		Residential real estate	3,023		1,178		811		5,683		10,695		2,183,974		2,194,669
Residential first lien	Residential first lien	1,934		354		51		2,706		5,045		1,294,489		1,299,534		Residential first lien	1,547		771		214		3,369		5,901		1,541,291		1,547,192
Residential junior lien/home equity	Residential junior lien/home equity	1,459		629		167		2,902		5,157		615,559		620,716		Residential junior lien/home equity	1,476		407		597		2,314		4,794		642,683		647,477
Commercial real estate	Commercial real estate	—		74		—		40,195		40,269		2,210,828		2,251,097		Commercial real estate	7,870		25		93		20,539		28,527		2,396,485		2,425,012
Multifamily	Multifamily	—		—		—		15,097		15,097		370,335		385,432		Multifamily	202		—		—		—		202		430,949		431,151
Nonowner occupied	Nonowner occupied	—		—		—		23,930		23,930		1,441,317		1,465,247		Nonowner occupied	7,547		—		92		19,575		27,214		1,483,133		1,510,347
Owner occupied	Owner occupied	—		74		—		1,168		1,242		399,176		400,418		Owner occupied	121		25		1		964		1,111		482,403		483,514
Loans to individuals	Loans to individuals	1,611		417		785		206		3,019		996,956		999,975		Loans to individuals	3,268		571		732		449		5,020		1,292,635		1,297,655
Automobile and recreational vehicles	Automobile and recreational vehicles	1,228		175		199		148		1,750		899,530		901,280		Automobile and recreational vehicles	2,694		368		295		361		3,718		1,206,733		1,210,451
Consumer credit cards	Consumer credit cards	36		44		63		—		143		11,008		11,151		Consumer credit cards	53		29		5		—		87		10,570		10,657
Consumer other	Consumer other	347		198		523		58		1,126		86,418		87,544		Consumer other	521		174		432		88		1,215		75,332		76,547
Total loans and leases	Total loans and leases	$	6,450	$	2,461	$	1,606	$	48,060	$	58,577	$	6,780,653	$	6,839,230	Total loans and leases	$	15,896	$	2,053	$	1,991	$	29,045	$	48,985	$	7,593,158	$	7,642,143

Nonaccrual Loans

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

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

Nonperforming Loans

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

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

2730

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were no nonperforming loans held for sale. During both the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, there were no gains ~~recognized on the sale of nonperforming loans. During the nine months ended September 30, 2021 $0.4 million in gains were~~ recognized on the sale of nonperforming loans.

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position.

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

September 30, 2022 December 31, 2021
Recorded
investment Unpaid
principal
balance Related
allowance Recorded
investment Unpaid
principal
balance Related
allowance
(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other $ 3,381 $ 9,749 $ 3,720 $ 10,303
Time and demand 3,381 9,749 3,720 10,303
Equipment finance — —
Time and demand other — —
Real estate construction — — 45 53
Construction other — —
Construction residential — —
Residential real estate 8,711 10,573 9,365 11,294
Residential first lien 5,180 6,262 5,200 6,337
Residential junior lien/home equity 3,531 4,311 4,165 4,957
Commercial real estate 15,467 16,434 40,591 41,525
Multifamily — — 14,677 14,677
Nonowner occupied 14,121 14,896 24,581 25,310
Owner occupied 1,346 1,538 1,333 1,538
Loans to individuals 475 553 446 485
Automobile and recreational vehicles 408 481 388 422
Consumer other 67 72 58 63
Subtotal 28,034 37,309 54,167 63,660
With an allowance recorded:
Commercial, financial, agricultural and other 1,380 1,555 $ 1,380 327 349 $ 307
Time and demand 1,380 1,555 1,380 327 349 307
Equipment finance — — —
Time and demand other — — —
Real estate construction — — — — — —
Construction other — — —
Construction residential — — —
Residential real estate — — — — — —
Residential first lien — — — — — —
Residential junior lien/home equity — — — — — —
Commercial real estate 6,278 7,200 154 686 711 88
Multifamily — — — 421 446 88
Nonowner occupied 6,278 7,200 154 — — —
Owner occupied — — — 265 265 —
Loans to individuals — — — — — —
Automobile and recreational vehicles — — — — — —
Consumer other — — — — — —
Subtotal 7,658 8,755 1,534 1,013 1,060 395
Total $ 35,692 $ 46,064 $ 1,534 $ 55,180 $ 64,720 $ 395

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

For the Nine Months Ended September 30,
2022 2021
Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
income
recognized
(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other $ 3,762 $ 88 $ 9,266 $ 50
Time and demand 3,762 88 9,266 50
Equipment finance — —
Time and demand other — —
Real estate construction — — 54 —
Construction other — —
Construction residential — —
Residential real estate 8,984 190 10,504 275
Residential first lien 5,120 139 5,734 210
Residential junior lien/home equity 3,864 51 4,770 65
Commercial real estate 16,663 89 20,813 101
Multifamily 230 — — —
Nonowner occupied 14,869 69 18,050 15
Owner occupied 1,564 20 2,763 86
Loans to individuals 435 13 486 12
Automobile and recreational vehicles 363 13 433 12
Consumer other 72 — 53 —
Subtotal 29,844 380 41,123 438
With an allowance recorded:
Commercial, financial, agricultural and other 195 — 1,820 50
Time and demand 195 — 1,820 50
Equipment finance — —
Time and demand other — —
Real estate construction — — — —
Construction other — —
Construction residential — —
Residential real estate — — — —
Residential first lien — — — —
Residential junior lien/home equity — — — —
Commercial real estate 6,795 — 7,408 —
Multifamily — — 451 —
Nonowner occupied 6,795 — 6,917 —
Owner occupied — — 40 —
Loans to individuals — — — —
Automobile and recreational vehicles — — — —
Consumer other — — — —
Subtotal 6,990 — 9,228 50
Total $ 36,834 $ 380 $ 50,351 $ 488

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

For the Three Months Ended September 30,
2022 2021
Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
Income
Recognized
(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other $ 3,518 $ 30 $ 9,858 $ 3
Time and demand 3,518 30 9,858 3
Equipment finance — —
Time and demand other — —
Real estate construction — — 54 —
Construction other — —
Construction residential — —
Residential real estate 8,981 48 10,060 54
Residential first lien 5,200 33 5,558 34
Residential junior lien/home equity 3,781 15 4,502 20
Commercial real estate 16,124 27 15,967 68
Multifamily — — — —
Nonowner occupied 14,637 18 13,633 4
Owner occupied 1,487 9 2,334 64
Loans to individuals 443 5 504 6
Automobile 369 5 448 6
Consumer other 74 — 56 —
Subtotal 29,066 110 36,443 131
With an allowance recorded:
Commercial, financial, agricultural and other 584 — 1,842 19
Time and demand 584 — 1,842 19
Equipment finance — —
Time and demand other — —
Real estate construction — — — —
Construction other — —
Construction residential — —
Residential real estate — — — —
Residential first lien — — — —
Residential junior lien/home equity — — — —
Commercial real estate 6,336 — 7,476 —
Multifamily — — 439 —
Nonowner occupied 6,336 — 6,917 —
Owner occupied — — 120 —
Loans to individuals — — — —
Automobile — — — —
Consumer other — — — —
Subtotal 6,920 — 9,318 19
Total $ 35,986 $ 110 $ 45,761 $ 150

~~Unfunded commitments related to~~ The increase in nonperforming loans is primarily a result of $14.9 million in loans acquired from Centric, offset by the removal of $6.4 million in accruing troubled debt restructurings ("TDR's"). The TDR's were ~~$0.2 million at both September 30, 2022~~eliminated as a result of our adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and ~~December 31, 2021. After consideration of~~Vintage Disclosures ("ASU 2022-02"). This standard was adopted on January 1, 2023 and eliminates the accounting guidance for TDR's while enhancing disclosure requirements ~~to draw and available collateral related to these commitments, it was determined that no reserve was required at September 30, 2022 and December 31, 2021.~~for loan modifications for borrowers experiencing financial difficulty.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2023						December 31, 2022
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	1,808	$	10,187			$	3,141	$	9,555
Time and demand	1,607		9,978				3,141		9,555

Equipment finance	201		209				—		—
Time and demand other	—		—				—		—
Real estate construction	—		—				—		—
Construction other	—		—				—		—
Construction residential	—		—				—		—
Residential real estate	6,419		8,312				9,145		11,010
Residential first lien	3,543		4,633				5,754		6,848
Residential junior lien/home equity	2,876		3,679				3,391		4,162
Commercial real estate	22,689		25,685				21,505		24,119
Multifamily	—		—				—		—
Nonowner occupied	20,938		23,063				20,155		22,565
Owner occupied	1,751		2,622				1,350		1,554
Loans to individuals	429		470				528		563
Automobile and recreational vehicles	355		396				440		475

Consumer other	74		74				88		88
Subtotal	31,345		44,654				34,319		45,247
With an allowance recorded:
Commercial, financial, agricultural and other	10,556		13,881		$	9,071	1,168		1,186		$	711
Time and demand	10,556		13,881		9,071		1,168		1,186		711

Equipment finance	—		—		—		—		—		—
Time and demand other	—		—		—		—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—		—		—		—
Construction residential	—		—		—		—		—		—
Residential real estate	1,237		1,406		103		—		—		—
Residential first lien	—		—		—		—		—		—
Residential junior lien/home equity	1,237		1,406		103		—		—		—
Commercial real estate	1,096		1,103		588		—		—		—
Multifamily	—		—		—		—		—		—
Nonowner occupied	173		212		172		—		—		—
Owner occupied	923		891		416		—		—		—
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—

Consumer other	—		—		—		—		—		—
Subtotal	12,889		16,390		9,762		1,168		1,186		711
Total	$	44,234	$	61,044	$	9,762	$	35,487	$	46,433	$	711

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended March 31,
	2023				2022

	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	1,693	$	—	$	3,561	$	29
Time and demand	1,455		—		3,561		29

Equipment finance	238		—		—		—
Time and demand other	—		—		—		—
Real estate construction	—		—		—		—
Construction other	—		—		—		—
Construction residential	—		—		—		—
Residential real estate	6,069		20		9,201		84
Residential first lien	3,437		20		5,197		62
Residential junior lien/home equity	2,632		—		4,004		22
Commercial real estate	21,974		—		24,312		13
Multifamily	—		—		—		—
Nonowner occupied	20,487		—		22,714		9
Owner occupied	1,487		—		1,598		4
Loans to individuals	432		—		435		4
Automobile and recreational vehicles	356		—		350		4

Consumer other	76		—		85		—
Subtotal	30,168		20		37,509		130
With an allowance recorded:
Commercial, financial, agricultural and other	7,445		—		384		6
Time and demand	7,445		—		384		6

Equipment finance	—		—		—		—
Time and demand other	—		—		—		—
Real estate construction	—		—		—		—
Construction other	—		—		—		—
Construction residential	—		—		—		—
Residential real estate	824		—		—		—
Residential first lien	—		—		—		—
Residential junior lien/home equity	824		—		—		—
Commercial real estate	711		—		416		—
Multifamily	—		—		416		—
Nonowner occupied	115		—		—		—
Owner occupied	596		—		—		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—

Consumer other	—		—		—		—
Subtotal	8,980		—		800		6
Total	$	39,148	$	20	$	38,309	$	136

Unfunded commitments related to nonperforming loans were $0.2 million at both March 31, 2023 and December 31, 2022. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required at March 31, 2023 and December 31, 2022.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

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

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

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


	For the Three Months Ended March 31, 2023
	Rate Reduction		Term Extension		Principal Forgiveness		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	—	%

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:


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




Residential real estate	(2.25)	%	0	$	—	—
Residential first lien	(2.25)		0	—		—









Total	(2.25)	%	0	$	—	—

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, 2023, there were no modified loans that were considered to be in default. The following table shows the payment status of loans that have been modified on or after January 1, 2023, the date we adopted ASU 2022-02:


	March 31, 2023
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Total
	(dollars in thousands)








Residential real estate	$	25	$	—	$	—	$	—	$	25
Residential first lien	25		—		—		—		25









Total loans and leases	$	25	$	—	$	—	$	—	$	25

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

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

~~The following table provides detail as to the total troubled debt restructured loans and total commitments outstanding on troubled debt restructured loans:~~

September 30, 2022 December 31, 2021
(dollars in thousands)
Troubled debt restructured loans
Accrual status $ 6,216 $ 7,120
Nonaccrual status 8,981 13,134
Total $ 15,197 $ 20,254
Commitments
Letters of credit $ 60 $ 60
Unused lines of credit 21 16
Total $ 81 $ 76

3234

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, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:

For the Nine Months Ended September 30, 2022
Type of Modification
Number
of
Contracts Extend
Maturity Modify
Rate Modify
Payments Total
Pre-Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Specific
Reserve
(dollars in thousands)
Residential real estate 2 $ — $ 10 $ 59 $ 69 $ 68 $ —
Residential first lien 2 — 10 59 69 68 —
Total 2 $ — $ 10 $ 59 $ 69 $ 68 $ —

For the Nine Months Ended September 30, 2021
Type of Modification
Number
of
Contracts Extend
Maturity Modify
Rate Modify
Payments Total
Pre-Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Specific
Reserve
(dollars in thousands)
Commercial, financial, agricultural and other 6 $ — $ — $ 6,803 $ 6,803 $ 2,895 $ —
Time and demand 6 — — 6,803 6,803 2,895 —
Residential real estate 13 — 219 301 520 500 —
Residential first lien 10 — 219 171 390 375 —
Residential junior lien/home equity 3 — — 130 130 125 —
Commercial real estate 2 — — 644 644 645 —
Nonowner occupied 2 — — 644 644 645 —
Loans to individuals 7 — 110 63 173 151 —
Automobile and recreational vehicles 7 — 110 63 173 151 —
Total 28 $ — $ 329 $ 7,811 $ 8,140 $ 4,191 $ —


	For the Three Months Ended March 31, 2022
		Type of Modification
	Number of Contracts	Extend Maturity		Modify Rate		Modify Payments		Total Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve
	(dollars in thousands)




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









Total	2	$	—	$	10	$	59	$	69	$	69	$	—

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the ~~nine~~three months ended ~~September 30,~~March 31, 2022, ~~and 2021,~~ $10 thousand ~~and $284 thousand, respectively,~~ of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. ~~For both 2022 and 2021, the~~The changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.

A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. The following table provides information related to loans that were restructured within the past twelve months and that were considered to be in default during the three months ended March 31:



	2022
		Number of Contracts	Recorded Investment
		(dollars in thousands)




Residential real estate		1	$	17
Residential first lien		1	17









Total		1	$	17

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The following ~~table provides~~tables provide detail ~~including specific reserves and reasons for modification,~~ related to the allowance for credit losses:


	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
Nonowner 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 ~~identified as troubled debt restructurings~~acquired from Centric and excludes the provision for off-balance sheet credit exposure included in the ~~three months ended September 30, 2021.~~income statement.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three Months Ended September 30, 2021
Type of Modification
Number
of
Contracts Extend
Maturity Modify
Rate Modify
Payments Total
Pre-Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Specific
Reserve
(dollars in thousands)
Commercial, financial, agricultural and other 5 $ — $ — $ 206 $ 206 $ 202 $ —
Time and demand 5 — — 206 206 202 —
Residential real estate 5 — 113 117 230 221 —
Residential first lien 3 — 113 — 113 109 —
Residential junior lien/home equity 2 — — 117 117 112 —
Commercial real estate 2 — — 644 644 645 —
Nonowner occupied 2 — — 644 644 645 —
Loans to individuals 3 — 17 63 80 76 —
Automobile and recreational vehicles 3 — 17 63 80 76 —
Total 15 $ — $ 130 $ 1,030 $ 1,160 $ 1,144 $ —

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the three months ended September 30, 2021, $86 thousand of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For three months ended September 30, 2022, there were no similar modifications. For modifications made in 2021, the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.

A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. For both the three and nine months ended September 30, 2022 and 2021, there were no loans restructured within the past twelve months that were considered to be in default.

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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


		For the Nine Months Ended September 30, 2022											For the Three Months Ended March 31, 2022
		Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance			Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
		(dollars in thousands)											(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	18,093	$	(1,836)	$	313	$	5,902	$	22,472	Commercial, financial, agricultural and other	$	18,093	$	(475)	$	80	$	3,023	$	20,721
Time and demand	Time and demand	15,283		(604)		155		5,712		20,546		Time and demand	15,283		(144)		53		3,715		18,907
Commercial credit cards	Commercial credit cards	247		(209)		68		194		300		Commercial credit cards	247		(19)		1		113		342
Equipment finance	Equipment finance	—		—		—		569		569		Equipment finance	—		—		—		31		31
Time and demand other	Time and demand other	2,563		(1,023)		90		(573)		1,057		Time and demand other	2,563		(312)		26		(836)		1,441
Real estate construction	Real estate construction	4,220		—		9		2,682		6,911		Real estate construction	4,220		—		—		710		4,930
Construction other	Construction other	3,278		—		9		1,736		5,023		Construction other	3,278		—		—		(103)		3,175
Construction residential	Construction residential	942		—		—		946		1,888		Construction residential	942		—		—		813		1,755
Residential real estate	Residential real estate	12,625		(263)		143		6,798		19,303		Residential real estate	12,625		(139)		29		4,213		16,728
Residential first lien	Residential first lien	7,459		(124)		112		5,562		13,009		Residential first lien	7,459		(40)		23		3,683		11,125
Residential junior lien/home equity	Residential junior lien/home equity	5,166		(139)		31		1,236		6,294		Residential junior lien/home equity	5,166		(99)		6		530		5,603
Commercial real estate	Commercial real estate	33,376		(1,887)		351		(3,941)		27,899		Commercial real estate	33,376		—		14		314		33,704
Multifamily	Multifamily	3,561		(411)		1		1,273		4,424		Multifamily	3,561		—		—		49		3,610
Nonowner occupied	Nonowner occupied	24,838		(1,236)		340		(7,940)		16,002		Nonowner occupied	24,838		—		5		(1,576)		23,267
Owner occupied	Owner occupied	4,977		(240)		10		2,726		7,473		Owner occupied	4,977		—		9		1,841		6,827
Loans to individuals	Loans to individuals	24,208		(3,113)		1,160		(2,747)		19,508		Loans to individuals	24,208		(1,009)		366		(8,460)		15,105
Automobile and recreational vehicles	Automobile and recreational vehicles	21,392		(1,515)		699		(3,416)		17,160		Automobile and recreational vehicles	21,392		(552)		255		(8,460)		12,635
Consumer credit cards	Consumer credit cards	496		(415)		53		255		389		Consumer credit cards	496		(109)		24		(29)		382
Consumer other	Consumer other	2,320		(1,183)		408		414		1,959		Consumer other	2,320		(348)		87		29		2,088
Total loans and leases	Total loans and leases	$	92,522	$	(7,099)	$	1,976	$	8,694	$	96,093	Total loans and leases	$	92,522	$	(1,623)	$	489	$	(200)	$	91,188

a) The provision ~~expense(credit)~~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 Nine Months Ended September 30, 2022
Loans
Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other $ 22,472 $ 1,380 $ 21,092 $ 1,169,206 $ 3,853 $ 1,165,353
Time and demand 20,546 1,380 19,166 1,012,169 3,853 1,008,316
Commercial credit cards 300 — 300 13,368 — 13,368
Equipment finance 569 — 569 43,777 — 43,777
Time and demand other 1,057 — 1,057 99,892 — 99,892
Real estate construction 6,911 — 6,911 422,690 — 422,690
Construction other 5,023 — 5,023 326,539 — 326,539
Construction residential 1,888 — 1,888 96,151 — 96,151
Residential real estate 19,303 — 19,303 2,153,904 — 2,153,904
Residential first lien 13,009 — 13,009 1,510,570 — 1,510,570
Residential junior lien/home equity 6,294 — 6,294 643,334 — 643,334
Commercial real estate 27,899 154 27,745 2,393,276 20,775 2,372,501
Multifamily 4,424 — 4,424 404,328 — 404,328
Nonowner occupied 16,002 154 15,848 1,516,255 20,101 1,496,154
Owner occupied 7,473 — 7,473 472,693 674 472,019
Loans to individuals 19,508 — 19,508 1,209,841 — 1,209,841
Automobile and recreational vehicles 17,160 — 17,160 1,120,838 — 1,120,838
Consumer credit cards 389 — 389 10,274 — 10,274
Consumer other 1,959 — 1,959 78,729 — 78,729
Total loans and leases $ 96,093 $ 1,534 $ 94,559 $ 7,348,917 $ 24,628 $ 7,324,289

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

For the Nine Months Ended September 30, 2021
Beginning balance Charge-offs Recoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other $ 17,187 $ (6,522) $ 299 $ 6,898 $ 17,862
Time and demand 16,838 (6,397) 292 6,849 17,582
Commercial credit cards 349 (125) 7 49 280
Real estate construction 7,966 — 135 (3,768) 4,333
Residential real estate 14,358 (130) 309 (1,732) 12,805
Residential first lien 7,919 (36) 206 (632) 7,457
Residential junior lien/home equity 6,439 (94) 103 (1,100) 5,348
Commercial real estate 41,953 (1,659) 130 (5,784) 34,640
Multifamily 6,240 (1) — (2,408) 3,831
Nonowner occupied 28,414 (1,556) 120 (880) 26,098
Owner occupied 7,299 (102) 10 (2,496) 4,711
Loans to individuals 19,845 (3,199) 1,163 6,736 24,545
Automobile and recreational vehicles 16,133 (1,399) 826 5,642 21,202
Consumer credit cards 635 (372) 51 182 496
Consumer other 3,077 (1,428) 286 912 2,847
Total loans and leases $ 101,309 $ (11,510) $ 2,036 $ 2,350 $ 94,185

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

For the Nine Months Ended September 30, 2021
Loans
Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other $ 17,862 $ 479 $ 17,383 $ 1,224,591 $ 5,561 $ 1,219,030
Time and demand 17,582 479 17,103 1,210,694 5,561 1,205,133
Commercial credit cards 280 — 280 13,897 — 13,897
Real estate construction 4,333 — 4,333 424,016 — 424,016
Residential real estate 12,805 — 12,805 1,875,375 254 1,875,121
Residential first lien 7,457 — 7,457 1,254,142 — 1,254,142
Residential junior lien/home equity 5,348 — 5,348 621,233 254 620,979
Commercial real estate 34,640 501 34,139 2,231,890 20,333 2,211,557
Multifamily 3,831 103 3,728 405,720 435 405,285
Nonowner occupied 26,098 338 25,760 1,442,845 18,314 1,424,531
Owner occupied 4,711 60 4,651 383,325 1,584 381,741
Loans to individuals 24,545 — 24,545 976,708 — 976,708
Automobile and recreational vehicles 21,202 — 21,202 886,367 — 886,367
Consumer credit cards 496 — 496 10,617 — 10,617
Consumer other 2,847 — 2,847 79,724 — 79,724
Total loans and leases $ 94,185 $ 980 $ 93,205 $ 6,732,580 $ 26,148 $ 6,706,432

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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

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

For the Three Months Ended September 30, 2021
Beginning balance Charge-offs Recoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other $ 21,466 $ (2,066) $ 106 $ (1,644) $ 17,862
Time and demand 21,098 (2,059) 104 (1,561) 17,582
Commercial credit cards 368 (7) 2 (83) 280
Real estate construction 4,285 — — 48 4,333
Residential real estate 12,933 (11) 98 (215) 12,805
Residential first lien 7,394 — 24 39 7,457
Residential junior lien/home equity 5,539 (11) 74 (254) 5,348
Commercial real estate 35,795 (102) 90 (1,143) 34,640
Multifamily 4,379 — — (548) 3,831
Nonowner occupied 26,911 — 80 (893) 26,098
Owner occupied 4,505 (102) 10 298 4,711
Loans to individuals 22,559 (727) 335 2,378 24,545
Automobile and recreational vehicles 19,298 (331) 251 1,984 21,202
Consumer credit cards 528 (125) 9 84 496
Consumer other 2,733 (271) 75 310 2,847
Total loans and leases $ 97,038 $ (2,906) $ 629 $ (576) $ 94,185

~~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)~~

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 (iv) to not reassess initial direct costs for any existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, including certain branch and ATM locations and office space. First Commonwealth has no material leasing arrangements for which it is the lessor of property or equipment.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


								September 30, 2022			December 31, 2021									March 31, 2023			December 31, 2022
Balance sheet:	Balance sheet:													Balance sheet:
Operating lease asset classified as premises and equipment	Operating lease asset classified as premises and equipment					$	41,637	$	40,550		Operating lease asset classified as premises and equipment				$	52,177	$	40,747
Operating lease liability classified as other liabilities	Operating lease liability classified as other liabilities					46,023		44,801			Operating lease liability classified as other liabilities				56,622		45,149

		For the Three Months Ended						For the Nine Months Ended											For the Three Months Ended
		September 30, 2022		September 30, 2021				September 30, 2022			September 30, 2021									March 31, 2023			March 31, 2022
Income statement:	Income statement:													Income statement:
Operating lease cost classified as occupancy and equipment expense	Operating lease cost classified as occupancy and equipment expense	$	1,259	$	1,545			$	3,727		$	4,281		Operating lease cost classified as occupancy and equipment expense						$	1,494		$	1,216

Weighted average lease term, in years	Weighted average lease term, in years							14.10			14.36			Weighted average lease term, in years						13.59			13.72
Weighted average discount rate	Weighted average discount rate							3.28		%	3.34		%	Weighted average discount rate						3.54		%	3.19		%
Operating cash flows	Operating cash flows							$	1,245		$	1,190		Operating cash flows						$	12,478		$	1,164

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

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

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

Future minimum payments for operating leases with initial or remaining terms of one year or more as of ~~September 30, 2022~~March 31, 2023 were as follows (dollars in thousands):


For the twelve months ended:
~~September 30, 2023~~March 31, 2024	$	~~4,983~~4,630
~~September 30, 2024~~March 31, 2025	~~4,820~~6,074
~~September 30, 2025~~March 31, 2026	~~4,705~~5,885
~~September 30, 2026~~March 31, 2027	~~4,262~~5,519
~~September 30, 2027~~March 31, 2028	~~4,040~~5,301
Thereafter	~~36,183~~45,400
Total future minimum lease payments	~~58,993~~72,809
Less remaining imputed interest	~~12,970~~16,187
Operating lease liability	$	~~46,023~~56,622

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Note 10 Income Taxes

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, First Commonwealth had no material unrecognized tax benefits or accrued interest and penalties. If applicable, First Commonwealth will record interest and penalties as a component of noninterest expense.

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11 Fair Values of Assets and Liabilities

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

FASB ASC Topic 825, “Financial Instruments” ~~(Topic~~("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 currently used to determine the U.S. Dollar yield curve includes cash LIBOR rates from overnight to one year, Eurodollar futures contracts and swap rates from one year to

4039

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

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

In addition, 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).

4140

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with ASU No. ~~2011-4,~~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)

Fair Value (dollars
in thousands)

Valuation
Technique

Unobservable Inputs

Range /
(weighted average)

September 30, 2022

March 31, 2023

Other Investments

1,170

Carrying Value

N/A

Other Investments

6,170

Carrying Value

N/A

Nonperforming Loans

422

(a)

Gas Reserve Study

Discount rate

10.00%

Nonperforming Loans

277

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$3.00 - $3.00 (b)

Gas per MMBTU

$3.00 - $3.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

Limited Partnership Investments

16,598

Par Value

N/A

Limited Partnership Investments

24,422

Par Value

N/A

December 31, 2021

December 31, 2022

Other Investments

1,170

Carrying Value

N/A

Other Investments

1,170

Carrying Value

N/A

Nonperforming Loans

598

(a)

Gas Reserve Study

Discount rate

10.00%

Nonperforming Loans

363

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$2.00 - $2.00 (b)

Gas per MMBTU

$3.00 - $3.00 (b)

Oil per BBL/d

$50.00 - $50.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

Limited Partnership Investments

14,981

Par Value

N/A

Limited Partnership Investments

17,691

Par Value

N/A

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

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

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

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


		September 30, 2022									March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:									Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	$	—	$	4,289	$	—	$	4,289	Mortgage-Backed Securities - Residential	$	—	$	3,896	$	—	$	3,896
Mortgage-Backed Securities - Commercial	Mortgage-Backed Securities - Commercial	—		283,253		—		283,253		Mortgage-Backed Securities - Commercial	—		269,883		—		269,883
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:									Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	—		461,513		—		461,513		Mortgage-Backed Securities - Residential	—		440,243		—		440,243

Mortgage-Backed Securities - Commercial										Mortgage-Backed Securities - Commercial	—		—		—		—
Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	—		873		—		873		Other Government-Sponsored Enterprises	—		893		—		893
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	—		8,172		—		8,172		Obligations of States and Political Subdivisions	—		8,405		—		8,405
Corporate Securities	Corporate Securities	—		29,315		—		29,315		Corporate Securities	—		27,293		—		27,293

Total Securities Available for Sale	Total Securities Available for Sale	—		787,415		—		787,415		Total Securities Available for Sale	—		750,613		—		750,613
Other Investments	Other Investments	—		14,286		1,170		15,456		Other Investments	—		30,030		6,170		36,200
Loans Held for Sale	Loans Held for Sale	—		13,811		—		13,811		Loans Held for Sale	—		11,050		—		11,050

Other Assets(a)	Other Assets(a)	—		57,179		16,598		73,777		Other Assets(a)	—		34,302		24,422		58,724
Total Assets	Total Assets	$	—	$	872,691	$	17,768	$	890,459	Total Assets	$	—	$	825,995	$	30,592	$	856,587
Other Liabilities(a)	Other Liabilities(a)	$	—	$	96,948	$	—	$	96,948	Other Liabilities(a)	$	—	$	67,268	$	—	$	67,268
Total Liabilities	Total Liabilities	$	—	$	96,948	$	—	$	96,948	Total Liabilities	$	—	$	67,268	$	—	$	67,268

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

4241

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2021									December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:									Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	$	—	$	5,662	$	—	$	5,662	Mortgage-Backed Securities - Residential	$	—	$	3,983	$	—	$	3,983
Mortgage-Backed Securities - Commercial	Mortgage-Backed Securities - Commercial	—		362,290		—		362,290		Mortgage-Backed Securities - Commercial	—		271,416		—		271,416
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:									Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	—		629,974		—		629,974		Mortgage-Backed Securities - Residential	—		448,989		—		448,989

Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	—		981		—		981		Other Government-Sponsored Enterprises	—		882		—		882
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	—		9,524		—		9,524		Obligations of States and Political Subdivisions	—		8,187		—		8,187
Corporate Securities	Corporate Securities	—		32,949		—		32,949		Corporate Securities	—		29,204		—		29,204

Total Securities Available for Sale	Total Securities Available for Sale	—		1,041,380		—		1,041,380		Total Securities Available for Sale	—		762,661		—		762,661
Other Investments	Other Investments	—		11,668		1,170		12,838		Other Investments	—		25,244		1,170		26,414
Loans Held for Sale	Loans Held for Sale	—		18,583		—		18,583		Loans Held for Sale	—		11,869		—		11,869

Other Assets(a)	Other Assets(a)	—		26,805		14,981		41,786		Other Assets(a)	—		50,738		17,691		68,429
Total Assets	Total Assets	$	—	$	1,098,436	$	16,151	$	1,114,587	Total Assets	$	—	$	850,512	$	18,861	$	869,373
Other Liabilities(a)	Other Liabilities(a)	$	—	$	34,263	$	—	$	34,263	Other Liabilities(a)	$	—	$	89,298	$	—	$	89,298
Total Liabilities	Total Liabilities	$	—	$	34,263	$	—	$	34,263	Total Liabilities	$	—	$	89,298	$	—	$	89,298

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

For the ~~nine~~three months ended ~~September 30,~~March 31, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


		2022							2023
		Other Investments		Other Assets		Total				Other Investments		Other Assets		Total
		(dollars in thousands)							(dollars in thousands)
Balance, beginning of period	Balance, beginning of period	$	1,170	$	14,981	$	16,151	Balance, beginning of period		$	1,170	$	17,691	$	18,861
Total gains or losses	Total gains or losses							Total gains or losses
Included in earnings	Included in earnings	—		—		—		Included in earnings		—		—		—
Included in other comprehensive income	Included in other comprehensive income	—		—		—		Included in other comprehensive income		—		—		—
Purchases, issuances, sales and settlements	Purchases, issuances, sales and settlements							Purchases, issuances, sales and settlements
Purchases	Purchases	—		1,809		1,809		Purchases		5,000		6,882		11,882
Issuances	Issuances	—		—		—		Issuances		—		—		—
Sales	Sales	—		—		—		Sales		—		—		—
Settlements	Settlements	—		(192)		(192)		Settlements		—		(151)		(151)
Transfers from Level 3	Transfers from Level 3	—		—		—		Transfers from Level 3		—		—		—
Transfers into Level 3	Transfers into Level 3	—		—		—		Transfers into Level 3		—		—		—
Balance, end of period	Balance, end of period	$	1,170	$	16,598	$	17,768	Balance, end of period		$	6,170	$	24,422	$	30,592

4342

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		2021							2022
		Other Investments		Other Assets		Total				Other Investments		Other Assets		Total
		(dollars in thousands)							(dollars in thousands)
Balance, beginning of period	Balance, beginning of period	$	1,670	$	6,620	$	8,290	Balance, beginning of period		$	1,170	$	14,981	$	16,151
Total gains or losses	Total gains or losses							Total gains or losses
Included in earnings	Included in earnings	—		—		—		Included in earnings		—		—		—
Included in other comprehensive income	Included in other comprehensive income	—		—		—		Included in other comprehensive income		—		—		—
Purchases, issuances, sales and settlements	Purchases, issuances, sales and settlements							Purchases, issuances, sales and settlements
Purchases	Purchases	—		8,113		8,113		Purchases		—		1,043		1,043
Issuances	Issuances	—		—		—		Issuances		—		—		—
Sales	Sales	—		—		—		Sales		—		(25)		(25)
Settlements	Settlements	—		(120)		(120)		Settlements		—		—		—
Transfers from Level 3	Transfers from Level 3	—		—		—		Transfers from Level 3		—		—		—
Transfers into Level 3	Transfers into Level 3	—		—		—		Transfers into Level 3		—		—		—
Balance, end of period	Balance, end of period	$	1,670	$	14,613	$	16,283	Balance, end of period		$	1,170	$	15,999	$	17,169

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at ~~September 30, 2022~~March 31, 2023 and ~~2021.~~

~~For the three months ended September 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:~~
2022
Other Investments Other
Assets Total
(dollars in thousands)
Balance, beginning of period $ 1,170 $ 16,613 $ 17,783
Total gains or losses
Included in earnings — — —
Included in other comprehensive income — — —
Purchases, issuances, sales and settlements
Purchases — 26 26
Issuances — — —
Sales — — —
Settlements — (41) (41)
Transfers from Level 3 — — —
Transfers into Level 3 — — —
Balance, end of period $ 1,170 $ 16,598 $ 17,768

~~ITEM 1.~~ ~~Financial Statements and Supplementary Data~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

2021
Other Investments Other
Assets Total
(dollars in thousands)
Balance, beginning of period $ 1,670 $ 7,448 $ 9,118
Total gains or losses
Included in earnings — — —
Included in other comprehensive income — — —
Purchases, issuances, sales and settlements
Purchases — 7,194 7,194
Issuances — — —
Sales — — —
Settlements — (29) (29)
Transfers from Level 3 — — —
Transfers into Level 3 — — —
Balance, end of period $ 1,670 $ 14,613 $ 16,283

During the three months ended September 30, 2022 and 2021, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2022 and 2021.2022.

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


		September 30, 2022									March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	—	$	22,672	$	11,486	$	34,158	Nonperforming loans	$	—	$	25,806	$	8,666	$	34,472
Other real estate owned	Other real estate owned	—		369		—		369		Other real estate owned	—		466		—		466
Total Assets	Total Assets	$	—	$	23,041	$	11,486	$	34,527	Total Assets	$	—	$	26,272	$	8,666	$	34,938


		December 31, 2021									December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	—	$	42,538	$	12,247	$	54,785	Nonperforming loans	$	—	$	23,140	$	11,636	$	34,776
Other real estate owned	Other real estate owned	—		729		—		729		Other real estate owned	—		553		—		553
Total Assets	Total Assets	$	—	$	43,267	$	12,247	$	55,514	Total Assets	$	—	$	23,693	$	11,636	$	35,329

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


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(dollars in thousands)										(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	(2,200)	$	(745)	$	(2,653)	$	(2,537)	Nonperforming loans		$	230	$	(171)
Other real estate owned	Other real estate owned	—		—		—		—		Other real estate owned		—		(54)
Total losses	Total losses	$	(2,200)	$	(745)	$	(2,653)	$	(2,537)	Total losses		$	230	$	(225)

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~~

4543

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement, is classified as Level 2. The fair value for other real estate owned, determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of ~~$0.3~~$0.4 million as of ~~September 30, 2022~~March 31, 2023 and consists of ~~three~~five residential real estate properties in Pennsylvania. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.

Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 13, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

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

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

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

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

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

Off-balance sheet instruments: Many of First Commonwealth’s off-balance sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. FASB ASC Topic 460, “Guarantees” clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The carrying amount and estimated fair value for standby letters of credit was $0.1 million at both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. See Note 6, “Commitments and Contingent Liabilities,” for additional information.

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

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

4644

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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


		September 30, 2022											March 31, 2023
				Fair Value Measurements Using:											Fair Value Measurements Using:
		Carrying Amount		Total		Level 1		Level 2		Level 3			Carrying Amount		Total		Level 1		Level 2		Level 3
		(dollars in thousands)											(dollars in thousands)
Financial assets	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	106,153	$	106,153	$	106,153	$	—	$	—	Cash and due from banks	$	113,692	$	113,692	$	113,692	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	74,619		74,619		74,619		—		—		Interest-bearing deposits	282,110		282,110		282,110		—		—
Securities available for sale	Securities available for sale	787,415		787,415		—		787,415		—		Securities available for sale	750,613		750,613		—		750,613		—
Securities held to maturity	Securities held to maturity	474,790		395,160		—		395,160		—		Securities held to maturity	451,278		381,741		—		381,741		—
Other investments	Other investments	15,456		15,456		—		14,286		1,170		Other investments	36,200		36,200		—		30,030		6,170
Loans held for sale	Loans held for sale	13,811		13,811		—		13,811		—		Loans held for sale	11,050		11,050		—		11,050		—
Loans	Loans	7,348,917		7,377,557		—		22,672		7,354,885		Loans	8,656,945		8,514,685		—		25,806		8,488,879
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	8,077,649		8,065,102		—		8,065,102		—		Deposits	9,234,948		9,223,482		—		9,223,482		—
Short-term borrowings	Short-term borrowings	97,932		85,814		—		85,814		—		Short-term borrowings	278,978		272,601		—		272,601		—
Subordinated debt	Subordinated debt	170,897		157,682		—		—		157,682		Subordinated debt	177,558		156,402		—		—		156,402
Long-term debt	Long-term debt	5,041		4,954		—		4,954		—		Long-term debt	4,679		4,651		—		4,651		—
Capital lease obligation	Capital lease obligation	5,551		5,551		—		5,551		—		Capital lease obligation	5,294		5,294		—		5,294		—


		December 31, 2021											December 31, 2022
				Fair Value Measurements Using:											Fair Value Measurements Using:
		Carrying Amount		Total		Level 1		Level 2		Level 3			Carrying Amount		Total		Level 1		Level 2		Level 3
		(dollars in thousands)											(dollars in thousands)
Financial assets	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	84,738	$	84,738	$	84,738	$	—	$	—	Cash and due from banks	$	124,254	$	124,254	$	124,254	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	310,634		310,634		310,634		—		—		Interest-bearing deposits	29,990		29,990		29,990		—		—
Securities available for sale	Securities available for sale	1,041,380		1,041,380		—		1,041,380		—		Securities available for sale	762,661		762,661		—		762,661		—
Securities held to maturity	Securities held to maturity	541,311		536,651		—		536,651		—		Securities held to maturity	461,162		386,205		—		386,205		—
Other investments	Other investments	12,838		12,838		—		11,668		1,170		Other investments	26,414		26,414		—		25,244		1,170
Loans held for sale	Loans held for sale	18,583		18,583		—		18,583		—		Loans held for sale	11,869		11,869		—		11,869		—
Loans	Loans	6,839,230		7,169,768		—		42,538		7,127,230		Loans	7,642,143		7,639,721		—		23,140		7,616,581
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	7,982,498		7,980,101		—		7,980,101		—		Deposits	8,005,469		7,992,012		—		7,992,012		—
Short-term borrowings	Short-term borrowings	138,315		136,473		—		136,473		—		Short-term borrowings	372,694		363,135		—		363,135		—
Subordinated debt	Subordinated debt	170,775		175,040		—		—		175,040		Subordinated debt	170,937		156,621		—		—		156,621
Long-term debt	Long-term debt	5,573		6,065		—		6,065		—		Long-term debt	4,862		4,781		—		4,781		—
Capital lease obligation	Capital lease obligation	5,921		5,921		—		5,921		—		Capital lease obligation	5,425		5,425		—		5,425		—

4745

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 Derivatives

Derivatives Not Designated as Hedging Instruments

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

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

We have 3731 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 1615 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 benchmarked to the 3-month LIBOR rate. Therefore, the interest rate swaps convert the interest rate benchmark on the first $70.0 million of 3-month LIBOR 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 benchmarked to the 1-month LIBOR rate. Therefore, the interest rate swaps convert the interest payments on the first $500.0 million of 1-month LIBOR based commercial loans into fixed rate payments.

The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income. For the three months ended ~~September 30, 2022,~~March 31, 2023, there was a negative impact of ~~$1.8 million on net interest income and for the nine months ended September 30, 2022, there was a negative impact of $1.4~~$4.2 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 ~~September 30, 2022,~~March 31, 2023, and changes in the fair value attributed to hedge ineffectiveness were not material.

4846

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 the rate in with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Loans under mandatory rate lock commitments are covered under forward sales contracts of mortgage-backed securities (“MBS”). Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in "Noninterest income" in the unaudited Consolidated Statements of Income. The impact to noninterest income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was ~~a decrease~~an increase of ~~$0.2 million and $1.6 million, respectively.~~$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 ~~September 30, 2022,~~March 31, 2023, the underlying funded mortgage loan commitments had a carrying value of ~~$7.7~~$3.8 million and a fair value of ~~$6.0~~$3.9 million, while the underlying unfunded mortgage loan commitments had a notional amount of ~~$22.0~~$13.9 million. At December 31, ~~2021,~~2022, the underlying funded mortgage loan commitments had a carrying value of ~~$11.0~~$4.3 million and a fair value of ~~$11.9~~$4.0 million, while the underlying unfunded mortgage loan commitments had a notional amount of ~~$29.7~~$12.0 million. The interest rate lock commitments ~~decreased~~increased other noninterest income by ~~$0.8 million and by $1.0~~$0.1 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

In addition, based on customer activity, a small amount of interest income on loans ismay be exposed to changes in foreign exchange rates. Several commercial borrowers have a portion of their operations outside of the United States and from time to time borrow funds on a short-term basis to fund those operations. In order to reduce the risk related to the translation of foreign denominated transactions into U.S. dollars, the Company ~~enters~~may enter into foreign exchange forward contracts. These contracts relate principally to the Euro and the Canadian dollar. The contracts are recorded at fair value with changes in fair value recorded in "Other operating expense" in the unaudited Consolidated Statements of Income. ~~The increase in~~At March 31, 2023 and December 31, 2022, there were no foreign exchange contracts outstanding and there was no impact to other noninterest expense for the three ~~and nine~~ months ended ~~September 30, 2022 totaled $7 thousand and $5 thousand, respectively.~~March 31, 2023.

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(dollars in thousands)					(dollars in thousands)
Derivatives not Designated as Hedging Instruments	Derivatives not Designated as Hedging Instruments					Derivatives not Designated as Hedging Instruments
Credit value adjustment	Credit value adjustment	$	—	$	(395)	Credit value adjustment	$	(117)	$	(27)
Notional amount:	Notional amount:					Notional amount:
Interest rate derivatives	Interest rate derivatives	823,176		708,759		Interest rate derivatives	813,543		816,745
Interest rate caps	Interest rate caps	15,421		66,007		Interest rate caps	15,257		15,340
Interest rate collars	Interest rate collars	35,354		35,354		Interest rate collars	35,354		35,354
Risk participation agreements	Risk participation agreements	264,306		241,111		Risk participation agreements	227,647		256,043
Sold credit protection on risk participation agreements	Sold credit protection on risk participation agreements	(122,041)		(95,618)		Sold credit protection on risk participation agreements	(100,349)		(100,741)
Interest rate options	Interest rate options	21,991		29,691		Interest rate options	13,887		12,009
Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments					Derivatives Designated as Hedging Instruments
Interest rate swaps:	Interest rate swaps:					Interest rate swaps:
Fair value adjustment	Fair value adjustment	(40,776)		(7,022)		Fair value adjustment	(32,789)		(38,596)
Notional amount	Notional amount	570,000		570,000		Notional amount	570,000		570,000
Interest rate forwards:	Interest rate forwards:					Interest rate forwards:
Fair value adjustment	Fair value adjustment	1,007		(29)		Fair value adjustment	(60)		63
Notional amount	Notional amount	23,000		38,000		Notional amount	16,000		16,000
Foreign exchange forwards:	Foreign exchange forwards:					Foreign exchange forwards:
Fair value adjustment	Fair value adjustment	—		12		Fair value adjustment	—		—
Notional amount	Notional amount	—		1,982		Notional amount	—		—

4947

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~~income", "Other expense," "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(dollars in thousands)										(dollars in thousands)
Non-hedging interest rate derivatives	Non-hedging interest rate derivatives									Non-hedging interest rate derivatives
(Decrease) increase in other income	(Decrease) increase in other income	$	(149)	$	(27)	$	(1,253)	$	309	(Decrease) increase in other income		$	239	$	(848)

Hedging interest rate derivatives	Hedging interest rate derivatives									Hedging interest rate derivatives
(Decrease) increase in interest and fees on loans	(Decrease) increase in interest and fees on loans	(1,975)		305		(1,288)		305		(Decrease) increase in interest and fees on loans		(4,758)		755
(Decrease) increase in interest from subordinated debentures	(Decrease) increase in interest from subordinated debentures	(159)		236		159		462		(Decrease) increase in interest from subordinated debentures		(560)		224

Hedging interest rate forwards	Hedging interest rate forwards									Hedging interest rate forwards
(Decrease) increase in other income		(764)		641		(1,036)		(401)
Increase (decrease) in other income										Increase (decrease) in other income		123		(865)

Hedging foreign exchange forwards	Hedging foreign exchange forwards									Hedging foreign exchange forwards
Increase in other expense	Increase in other expense	7		3		5		5		Increase in other expense		—		1

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 ~~as of both September 30, 2022~~at March 31, 2023 and December 31, ~~2021~~2022 was $360.4 million and $303.3 ~~million.~~million, respectively. The $57.1 million increase in goodwill during the three months ended March 31, 2023 is the result of the Centric acquisition. No impairment charges on goodwill or other intangible assets were incurred in ~~2022~~2023 or ~~2021.~~2022.

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

As of ~~September 30, 2022,~~March 31, 2023, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

5048

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:


				September 30, 2022		December 31, 2021			March 31, 2023			December 31, 2022
		Due	Rate	Amount			Amount				Due	Rate	Amount		Amount
				(dollars in thousands)					(dollars in thousands)
Owed to:	Owed to:									Owed to:

First Commonwealth Bank	First Commonwealth Bank	2028	4.875% until June 1, 2023, then 3-Month LIBOR + 1.845%	$	49,476		$	49,407		First Commonwealth Bank	2028	4.875% until June 1, 2023, then 3-Month LIBOR + 1.845%	$	49,523	$	49,499
First Commonwealth Bank	First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month LIBOR + 2.37%	49,254			49,201			First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month LIBOR + 2.37%	49,288		49,271
First Commonwealth Financial Corp										First Commonwealth Financial Corp	2031	4.50% until March 29, 2026, then Prime + 1.00%	6,580		—
First Commonwealth Capital Trust II	First Commonwealth Capital Trust II	2034	3-Month LIBOR + 2.85%	30,929			30,929			First Commonwealth Capital Trust II	2034	3-Month LIBOR + 2.85%	30,929		30,929
First Commonwealth Capital Trust III	First Commonwealth Capital Trust III	2034	3-Month LIBOR + 2.85%	41,238			41,238			First Commonwealth Capital Trust III	2034	3-Month LIBOR + 2.85%	41,238		41,238
Total	Total			$	170,897		$	170,775		Total			$	177,558	$	170,937

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

On May 21, 2018, First Commonwealth issued ten-year subordinated notes with an aggregate principal amount of $50.0 million and a fixed-to-floating rate of 4.875%. The rate remains fixed until June 1, 2023, then adjusts on a quarterly basis to three-month LIBOR + 1.845%. The Bank may redeem the notes, beginning with the interest payment due on June 1, 2023, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. Deferred issuance costs of $0.9 million are being amortized on a straight-line basis over the term of the notes.

On May 21, 2018, First Commonwealth issued fifteen-year subordinated notes with an aggregate principal amount of $50.0 million and a fixed-to-floating rate of 5.50%. The rate remains fixed until June 1, 2028, then adjusts on a quarterly basis to three-month LIBOR + 2.37%. The Bank may redeem the notes, 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 LIBOR + 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 LIBOR + 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 LIBOR 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)

Capital Trust III at 1.525% until August 15, 2026. Additional information related to these cash flow hedges can be found in Note 12- "Derivatives".

Note 15 Revenue Recognition

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

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

Trust Income

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

Service Charges on Deposit Accounts

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

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

5150

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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~~

~~Insurance and Retail Brokerage Commissions~~

~~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 September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(dollars in thousands)										(dollars in thousands)
Noninterest Income	Noninterest Income									Noninterest Income
In-scope of Topic 606:	In-scope of Topic 606:									In-scope of Topic 606:
Trust income	Trust income	$	2,777	$	3,118	$	8,063	$	8,340	Trust income		$	2,486	$	2,713
Service charges on deposit accounts	Service charges on deposit accounts	5,194		4,770		14,695		13,127		Service charges on deposit accounts		4,918		4,615
Insurance and retail brokerage commissions	Insurance and retail brokerage commissions	2,048		2,218		6,806		6,368		Insurance and retail brokerage commissions		2,552		2,272
Card-related interchange income	Card-related interchange income	6,980		7,052		20,607		20,885		Card-related interchange income		6,829		6,490
Gain on sale of other loans and assets	Gain on sale of other loans and assets	40		125		393		630		Gain on sale of other loans and assets		61		43
Other income	Other income	991		1,064		3,064		3,146		Other income		1,069		975
Noninterest Income (in-scope of Topic 606)	Noninterest Income (in-scope of Topic 606)	18,030		18,347		53,628		52,496		Noninterest Income (in-scope of Topic 606)		17,915		17,108
Noninterest Income (out-of-scope of Topic 606)	Noninterest Income (out-of-scope of Topic 606)	7,884		8,898		20,771		28,190		Noninterest Income (out-of-scope of Topic 606)		5,048		6,868
Total Noninterest Income	Total Noninterest Income	$	25,914	$	27,245	$	74,399	$	80,686	Total Noninterest Income		$	22,963	$	23,976

Note 16 Subsequent Event

On April 24, 2023, the Board of Directors authorized an increase of $25.0 million to the existing share repurchase program of the Company's common stock. Management is authorized to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or otherwise in a manner that is intended to comply with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. First Commonwealth may suspend or discontinue the program at any time.

Table of Contents

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

Forward-Looking Statements

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

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

•Volatility and disruption in national and international financial markets.

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

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

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

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

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

•Unexpected outflows of uninsured deposits.

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

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

•The soundness of other financial institutions.

•Political instability.

•Impairment of our goodwill or other intangible assets.

•Acts of God or of war or terrorism.

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

•Changes in consumer spending, borrowings and savings habits.

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

•Technological changes.

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

•Acquisitions and integration of acquired businesses.

•Our ability to increase market share and control expenses.

•Our ability to attract and retain qualified employees.

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

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

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

•Changes in our liquidity position.

~~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 impact of the ongoing COVID-19 pandemic and any other pandemic, epidemic or health-related crisis.~~

•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 ~~Measure~~Measures

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

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages ~~58 and 66~~55 for the ~~nine and~~ three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

5553

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Selected Financial Data

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


		For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended March 31,
		2022			2021			2022			2021						2023			2022
		(dollars in thousands, except per share data)														(dollars in thousands, except per share data)
Net Income	Net Income	$	33,968		$	34,092		$	92,448		$	103,481		Net Income			$	30,224		$	27,726
Per Share Data:	Per Share Data:													Per Share Data:
Basic Earnings per Share	Basic Earnings per Share	$	0.36		$	0.36		$	0.99		$	1.08		Basic Earnings per Share			$	0.30		$	0.29
Diluted Earnings per Share	Diluted Earnings per Share	0.36			0.36			0.98			1.08			Diluted Earnings per Share			0.30			0.29
Cash Dividends Declared per Common Share	Cash Dividends Declared per Common Share	0.120			0.115			0.355			0.340			Cash Dividends Declared per Common Share			0.120			0.115
Average Balance:	Average Balance:													Average Balance:
Total assets	Total assets	$	9,534,094		$	9,502,501		$	9,553,082		$	9,362,908		Total assets			$	10,488,908		$	9,524,578
Total equity	Total equity	1,063,334			1,113,789			1,078,038			1,096,282			Total equity			1,161,054			1,107,415
End of Period Balance:	End of Period Balance:													End of Period Balance:
Net loans and leases (1)	Net loans and leases (1)							$	7,266,635		$	6,658,320		Net loans and leases (1)			$	8,534,110		$	6,871,430
Total assets	Total assets							9,578,630			9,477,854			Total assets			11,113,752			9,642,124
Total deposits	Total deposits							8,077,649			7,936,485			Total deposits			9,234,948			8,171,847
Total equity	Total equity							1,022,575			1,112,855			Total equity			1,225,014			1,067,619
Key Ratios:	Key Ratios:													Key Ratios:
Return on average assets	Return on average assets	1.41		%	1.42		%	1.29		%	1.48		%	Return on average assets			1.17		%	1.18		%
Return on average equity	Return on average equity	12.67		%	12.14		%	11.47		%	12.62		%	Return on average equity			10.56		%	10.15		%
Dividends payout ratio	Dividends payout ratio	33.33		%	31.94		%	35.86		%	31.48		%	Dividends payout ratio			40.00		%	39.66		%
Average equity to average assets ratio	Average equity to average assets ratio	11.15		%	11.72		%	11.28		%	11.71		%	Average equity to average assets ratio			11.07		%	11.63		%
Net interest margin	Net interest margin	3.76		%	3.23		%	3.45		%	3.27		%	Net interest margin			4.01		%	3.19		%
Net loans to deposits ratio	Net loans to deposits ratio							89.96		%	83.90		%	Net loans to deposits ratio			92.41		%	84.09		%

(1) Includes loans held for sale.

Results of Operations

~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared to ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Net Income

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, First Commonwealth had net income of ~~$92.4~~$30.2 million, or ~~$0.98~~$0.30 diluted earnings per share, compared to net income of ~~$103.5~~$27.7 million, or ~~$1.08~~$0.29 diluted earnings per share, in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~decrease~~increase in net income was primarily the result of a ~~$12.0~~$26.2 million increase in net interest income and a $4.6 million decrease in provision for credit losses, ~~recognized during~~excluding the ~~nine months ended September 30, 2022 compared~~$10.7 million in provision expense related to ~~a provision of $1.4 million recognized~~the day 1 CECL adjustment on non-PCD loans acquired in the ~~same period~~Centric acquisition. Partially offsetting these positive changes was a $15.7 million increase in ~~2021. Additionally, net interest income increased $15.9 million,~~ noninterest ~~income decreased $6.3 million and noninterest expense increased $12.9 million during the nine months ended September 30, 2022 compared to the same period in 2021.~~expense.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company’s return on average equity was ~~11.47%~~10.56% and its return on average assets was ~~1.29%~~1.17%, compared to ~~12.62%~~10.15% and ~~1.48%~~1.18%, respectively, for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was ~~$225.0~~$94.7 million in the first ~~nine~~three months of ~~2022,~~2023, compared to ~~$209.1~~$68.4 million for the same period in ~~2021.~~2022. The increase in net interest income can be attributed to growth in earning assets and a 14153 basis point increase in the yield on interest-earning assets 7offset by a 105 basis point ~~decrease~~increase in the cost of interest-bearing ~~liabilities and a $168.8 million increase in average interest-earning assets.~~liabilities. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 80.4% and 74.0% for the three months ended March 31, 2023 and 2022, respectively.

5654

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

~~before provision expense plus noninterest income), at 75.1% and 72.1% for the nine months ended September 30, 2022 and 2021, respectively.~~

The net interest margin on a fully taxable equivalent basis was ~~3.45%~~4.01% for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~3.27%~~3.19% for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The taxable equivalent yield on interest-earning assets was ~~3.59%~~4.86% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, an increase of 14153 basis points compared to the ~~3.45%~~3.33% yield for the same period in ~~2021. Impacting~~2022. This change is largely due to a higher loan portfolio yield, which improved by 147 basis points when compared to the three months ended March 31, 2022. Contributing to this increase was the yield on ~~interest-earning assets is a $354.5 million decline in average PPP loans,~~our adjustable and variable rate commercial loan portfolios, which ~~yield higher~~increased 253 basis points largely due to the Federal Reserve increasing short term interest rates ~~than the remainder~~by 450 basis points since March 31, 2022. Additionally, five basis points of the ~~loan portfolio due~~increase in the yield on interest-earnings assets can be attributed to the recognition of PPP loan deferred processing fees, net of deferred origination costs. As the PPP loans paid off, due to forgiveness by the US Government, the funds were used to fund growth in the loan portfolio. Also impacting the yield on interest-earning assets for the nine months ended September 30, 2022 was $1.2$1.1 million in ~~interest and loan fees~~accretion of the purchase accounting marks recognized when a nonaccrual loan was paid off during the second quarter. The interest and fees collected on this loan increased the net interest margin for the nine months ended September 30, 2022 by 2 basis points.

~~The loan yield for the nine months ended September 30, 2022, increased 6 basis points compared to the same period in 2021. This increase in loan yield was~~as a result of ~~growth in~~ the loan portfolio as well as increases in interest rates. The loan yield was negatively impacted by a decline in average PPP loans outstanding. These loans, which were originated under the CARES Act, had an average balance of $26.1 million with a stated loan rate of 1% and a yield of 13.50% for the nine months ended September 30, 2022. During the nine months ended September 30, 2021, PPP loans averaged $380.6 million with a yield of 6.72%. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $2.3 million for the nine months ended September 30, 2022. These amounts are recognized in interest income as a yield adjustment over the life of the loan with accelerated recognition when a loan is forgiven or paid off. As of September 30, 2022, we expect to recognize additional PPP-related deferred processing fees, net of origination costs, of approximately $0.1 million as an adjustment to yield over the remaining terms of the loans. The balance of PPP loans outstanding at September 30, 2022 totaled $4.9 million. During the nine months ended September 30, 2022, PPP loans generated $2.6 million in income compared to $19.1 million during the same period in 2021. For the nine months ended September 30, 2022, PPP loans increased the yield on total loans and the net interest margin by 4 basis points and 3 basis points, respectively. PPP loans increased both the yield on total loans and the net interest margin by 16 basis points during the nine months ended September 30, 2021.Centric acquisition.

The investment portfolio yield increased 832 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased ~~$23.8~~$291.6 million as maturities and runoff funded loan growth. Interest-bearing deposits with banks, which decreased from ~~$340.9~~$284.4 million in ~~2021~~2022 to ~~$240.5~~$46.3 million in ~~2022~~2023 increased the yield on earning assets by 81 basis points for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023 as its yield increased 431 basis points.

The cost of interest-bearing liabilities ~~decreased~~increased to ~~0.22%~~1.27% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, from ~~0.29%~~0.22% for the same period in 2021. This decline is a result of changes in the mix of interest-bearing liabilities as higher costing interest-bearing liabilities, such as time deposits and long-term debt declined on average $112.7 million and $25.4 million, respectively.2022. The cost of interest-bearing deposits ~~decreased 6~~increased 99 basis points and short-term borrowings increased 2358 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. Comparing the three months ended March 31, 2023 with the comparable period in 2022, average time deposits increased $307.7 million, or 82.2%, while the cost of these deposits increased 205 basis points. Contributing to average growth in time deposits was an average of $54.0 million acquired as part of the Centric acquisition. Other interest-bearing deposits increased on average $331.7 million, or 6.7%, compared to the three months ended March 31, 2022 and the cost of these deposits increased 84 basis points. Average growth in other-interest bearing deposits attributable to the Centric acquisition totaled $251.0 million.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, changes in rates positively impacted net interest income by ~~$6.3~~$14.7 million when compared with the same period in ~~2021.~~2022. The higher yield on interest-earning assets ~~despite lower income on PPP loans, positively~~ impacted net interest income by ~~$5.0~~$31.6 million, while the ~~decrease~~increase in the cost of interest-bearing liabilities ~~positively~~negatively impacted net interest income by ~~$1.3~~$16.8 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by ~~$9.5~~$11.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the same period in ~~2021.~~2022. Higher levels of interest-earning assets resulted in an increase of ~~$8.3~~$11.8 million in interest income, and changes in the volume and mix of interest-bearing liabilities ~~decreased~~increased interest expense by ~~$1.2 million, primarily due to decreases in the cost of long-term debt and time deposits.~~$0.3 million. Average earning assets for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$168.8~~$878.2 million, or ~~2.0%~~10.1%, compared to the same period in ~~2021.~~2022. Average loans for the comparable period increased ~~$293.0 million,~~$1.4 billion, or ~~4.3%~~20.4%.

Net interest income also benefited from a ~~$108.3~~$84.2 million increase in average net free funds at ~~September 30, 2022~~March 31, 2023 as compared to ~~September 30, 2021.~~March 31, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of ~~$145.4~~$33.3 million, or ~~5.7%~~1.3%, in noninterest-bearing demand deposit average balances. ~~Average time deposits for the~~

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

nine months ended September 30, 2022 decreased by $112.7 million compared to the comparable period in 2021, while the average rate paid on time deposits decreased 28 basis points compared to the same period in 2021.

The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021			2023		2022
		(dollars in thousands)					(dollars in thousands)
Interest income per Consolidated Statements of Income	Interest income per Consolidated Statements of Income	$	233,672	$	220,308	Interest income per Consolidated Statements of Income	$	114,589	$	71,244
Adjustment to fully taxable equivalent basis	Adjustment to fully taxable equivalent basis	759		834		Adjustment to fully taxable equivalent basis	305		253
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	Interest income adjusted to fully taxable equivalent basis (non-GAAP)	234,431		221,142		Interest income adjusted to fully taxable equivalent basis (non-GAAP)	114,894		71,497
Interest expense	Interest expense	9,478		12,021		Interest expense	20,231		3,072
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	224,953	$	209,121	Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	94,663	$	68,425

5855

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following is an analysis of the average balance sheets and net interest income on a fully taxable equivalent basis for the ~~nine~~three months ended ~~September 30:~~March 31:


		2022						2021							2023						2022
		Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate			Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
		(dollars in thousands)													(dollars in thousands)
Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	240,509	$	1,346	0.75	%	$	340,872	$	297	0.12	%	Interest-bearing deposits with banks	$	46,304	$	510	4.47	%	$	284,367	$	111	0.16	%
Tax-free investment securities	Tax-free investment securities	23,371		459		2.63		28,805		582		2.70		Tax-free investment securities	21,983		148		2.73		24,430		160		2.66
Taxable investment securities	Taxable investment securities	1,397,982		19,332		1.85		1,416,373		18,612		1.76		Taxable investment securities	1,211,190		6,294		2.11		1,500,334		6,613		1.79
Loans and leases, net of unearned income (b)(c)	Loans and leases, net of unearned income (b)(c)	7,065,213		213,294		4.04		6,772,239		201,651		3.98		Loans and leases, net of unearned income (b)(c)	8,301,449		107,942		5.27		6,893,628		64,613		3.80
Total interest-earning assets	Total interest-earning assets	8,727,075		234,431		3.59		8,558,289		221,142		3.45		Total interest-earning assets	9,580,926		114,894		4.86		8,702,759		71,497		3.33
Noninterest-earning assets:	Noninterest-earning assets:													Noninterest-earning assets:
Cash	Cash	113,538						93,108						Cash	112,157						114,672
Allowance for credit losses	Allowance for credit losses	(93,923)						(103,654)						Allowance for credit losses	(123,672)						(93,645)
Other assets	Other assets	806,392						815,165						Other assets	919,497						800,792
Total noninterest-earning assets	Total noninterest-earning assets	826,007						804,619						Total noninterest-earning assets	907,982						821,819
Total Assets	Total Assets	$	9,553,082					$	9,362,908					Total Assets	$	10,488,908					$	9,524,578
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity													Liabilities and Shareholders’ Equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing demand deposits (d)	Interest-bearing demand deposits (d)	$	1,595,905	$	435	0.04	%	$	1,531,928	$	332	0.03	%	Interest-bearing demand deposits (d)	$	1,848,228	$	3,732	0.82	%	$	1,551,979	$	100	0.03	%
Savings deposits (d)	Savings deposits (d)	3,404,113		1,506		0.06		3,256,381		2,531		0.10		Savings deposits (d)	3,463,858		7,853		0.92		3,428,411		449		0.05
Time deposits	Time deposits	354,938		697		0.26		467,653		1,890		0.54		Time deposits	682,144		3,933		2.34		374,484		264		0.29
Short-term borrowings	Short-term borrowings	104,343		89		0.11		117,478		77		0.09		Short-term borrowings	266,932		2,401		3.65		115,544		21		0.07
Long-term debt	Long-term debt	181,856		6,751		4.96		207,225		7,191		4.64		Long-term debt	185,367		2,312		5.06		182,119		2,238		4.98
Total interest-bearing liabilities	Total interest-bearing liabilities	5,641,155		9,478		0.22		5,580,665		12,021		0.29		Total interest-bearing liabilities	6,446,529		20,231		1.27		5,652,537		3,072		0.22
Noninterest-bearing liabilities and shareholders’ equity:	Noninterest-bearing liabilities and shareholders’ equity:													Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	Noninterest-bearing demand deposits (d)	2,701,458						2,556,078						Noninterest-bearing demand deposits (d)	2,678,849						2,645,551
Other liabilities	Other liabilities	132,431						129,883						Other liabilities	202,476						119,075
Shareholders’ equity	Shareholders’ equity	1,078,038						1,096,282						Shareholders’ equity	1,161,054						1,107,415
Total Noninterest-Bearing Funding Sources	Total Noninterest-Bearing Funding Sources	3,911,927						3,782,243						Total Noninterest-Bearing Funding Sources	4,042,379						3,872,041
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	9,553,082					$	9,362,908					Total Liabilities and Shareholders’ Equity	$	10,488,908					$	9,524,578
Net Interest Income and Net Yield on Interest-Earning Assets	Net Interest Income and Net Yield on Interest-Earning Assets			$	224,953	3.45	%			$	209,121	3.27	%	Net Interest Income and Net Yield on Interest-Earning Assets			$	94,663	4.01	%			$	68,425	3.19	%

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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

(c)Loan income includes loan fees earned.

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

5956

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table shows the effect of changes in volumes and rates on interest income and interest expense for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with ~~September 30, 2021:~~March 31, 2022:


		Analysis of Year-to-Year Changes in Net Interest Income							Analysis of Year-to-Year Changes in Net Interest Income
		Total Change		Change Due To Volume		Change Due To Rate (a)			Total Change		Change Due To Volume		Change Due To Rate (a)
		(dollars in thousands)							(dollars in thousands)
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	1,049	$	(90)	$	1,139	Interest-bearing deposits with banks	$	399	$	(94)	$	493
Tax-free investment securities	Tax-free investment securities	(123)		(110)		(13)		Tax-free investment securities	(12)		(16)		4
Taxable investment securities	Taxable investment securities	720		(242)		962		Taxable investment securities	(319)		(1,276)		957
Loans and leases	Loans and leases	11,643		8,721		2,922		Loans and leases	43,329		13,191		30,138
Total interest income (b)	Total interest income (b)	13,289		8,279		5,010		Total interest income (b)	43,397		11,805		31,592
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing demand deposits	Interest-bearing demand deposits	103		14		89		Interest-bearing demand deposits	3,632		22		3,610
Savings deposits	Savings deposits	(1,025)		110		(1,135)		Savings deposits	7,404		4		7,400
Time deposits	Time deposits	(1,193)		(455)		(738)		Time deposits	3,669		220		3,449
Short-term borrowings	Short-term borrowings	12		(9)		21		Short-term borrowings	2,380		26		2,354
Long-term debt	Long-term debt	(440)		(880)		440		Long-term debt	74		40		34
Total interest expense	Total interest expense	(2,543)		(1,220)		(1,323)		Total interest expense	17,159		312		16,847
Net interest income	Net interest income	$	15,832	$	9,499	$	6,333	Net interest income	$	26,238	$	11,493	$	14,745

(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 on off-balance sheet commitments. The provision for credit losses is an amount added to the allowance, against which credit losses are charged.

6057

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The table below provides a breakout of the provision for credit losses by loan category for the ~~nine~~three months ended ~~September 30:~~March 31:

2022 2021
Dollars Percentage Dollars Percentage
(dollars in thousands)
Commercial, financial, agricultural and other $ 5,902 68 % $ 6,898 293 %
Time and demand 5,712 66 6,849 291
Commercial credit cards 194 2 49 2
Equipment finance 569 7
Time and demand other (573) (7)
Real estate construction 2,682 31 (3,768) (160)
Construction other 1,736 20
Construction residential 946 11
Residential real estate 6,798 78 (1,732) (74)
Residential first lien 5,562 64 (632) (27)
Residential junior lien/home equity 1,236 14 (1,100) (47)
Commercial real estate (3,941) (45) (5,784) (246)
Multifamily 1,273 15 (2,408) (103)
Nonowner occupied (7,940) (91) (880) (37)
Owner occupied 2,726 31 (2,496) (106)
Loans to individuals (2,747) (32) 6,736 287
Automobile and recreational vehicles (3,416) (40) 5,642 240
Consumer credit cards 255 3 182 8
Consumer other 414 5 912 39
Provision for credit losses on loans and leases $ 8,694 100 % $ 2,350 100 %
Provision for off-balance sheet credit exposure 3,292 (997)
Total provision for credit losses $ 11,986 $ 1,353

~~The provision for credit losses on loans and leases for the nine months ended September 30, 2022 increased in comparison to the nine months ended September 30, 2021 by $6.3 million.~~

For the nine months ended September 30, 2022, the increase in provision expense on loans and leases was primarily due to changes in the economic forecast used to estimate the allowance for credit losses as well as loan growth. Additionally, the provision for residential first lien and the negative provision for automobile and recreational vehicles were largely the result of an annual review of loss history data used in the allowance for credit loss model. Contributing to the negative provision for commercial real estate is the release of the remaining COVID-19 qualitative reserves which were established at the beginning of the pandemic. These reserves have been released as the risk of the COVID-19 pandemic on the loan portfolio declined. Provision expense was also impacted by an increase of $0.6 million in reserves on individually analyzed loans.


	2023				2022
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	991	(170)	%	$	3,023	(1,511)	%
Time and demand	179		(31)		3,715		(1,857)
Commercial credit cards	20		(3)		113		(56)
Equipment finance	420		(72)		31		(16)
Time and demand other	372		(64)		(836)		418
Real estate construction	(2,798)		482		710		(355)
Construction other	(1,842)		317		(103)		52
Construction residential	(956)		165		813		(407)
Residential real estate	261		(45)		4,213		(2,107)
Residential first lien	358		(62)		3,683		(1,842)
Residential junior lien/home equity	(97)		17		530		(265)
Commercial real estate	307		(53)		314		(157)
Multifamily	67		(12)		49		(25)
Nonowner occupied	238		(41)		(1,576)		788
Owner occupied	2		—		1,841		(920)
Loans to individuals	659		(114)		(8,460)		4,230
Automobile and recreational vehicles	599		(104)		(8,460)		4,230
Consumer credit cards	5		(1)		(29)		15
Consumer other	55		(9)		29		(15)

Provision for credit losses on loans and leases	$	(580)	100	%	$	(200)	100	%
Provision for credit losses - acquisition day 1 non-PCD	10,653				—
Total provision for credit losses on loans and leases	10,073				(200)
Provision for off-balance sheet credit exposure	(2,070)				2,164
Total provision for credit losses	$	8,003			$	1,964

Total provision expense for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, increased $6.0 million compared to the three months ended March 31, 2022. This increase is a result of $10.7 million in provision expense recognized in the ~~loan portfolio changes noted above~~first quarter of 2023 as ~~well as growth~~the day 1 non-PCD provision expense resulting from the Centric acquisition offset by a $4.2 million decline in the provision for off-balance sheet commitments. The negative provision for off-balance sheet commitments ~~and~~for the ~~impact on the off balance~~period ending March 31, 2023 was a result of lower off-balance sheet ~~reserve~~commitments related to construction ~~commitments because of the annual review of peer loss history data.~~

~~The provision expense for the nine months ended September 30, 2021 was primarily the result of an improved economic forecast which reflected a decline~~loans and improvement in the ~~projected impact of~~economic variables considered in the COVID-19 pandemic on the economy and expected loan losses. Provision expense for the time and demand and automobile and recreational vehicle portfolios were also impacted by increases in qualitative reserves due to changes in risk ratings and portfolio growth, respectively.calculation.

The allowance for credit losses was ~~$96.1~~$133.9 million, or ~~1.31%~~1.55%, of total loans outstanding at ~~September 30, 2022,~~March 31, 2023, compared to ~~$92.5~~$102.9 million, or 1.35%, at December 31, ~~2021~~2022 and ~~$94.2~~$91.2 million, or ~~1.40%~~1.31%, at ~~September 30, 2021.~~March 31, 2022. Nonperforming loans as a percentage of total loans and leases decreased to ~~0.48%~~0.51% at ~~September 30,~~March 31, 2023 from 0.54% as of March 31, 2022 and increased from ~~0.81%~~0.46% at December 31, ~~2021~~2022. The allowance to nonperforming loan ratio was 302.67%, 289.98% and ~~0.56%~~243.38% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at March 31, 2023.

6158

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

~~of September 30, 2021. The allowance to nonperforming loan ratio was 269.23%, 167.67% and 247.30% as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively.~~

~~Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at September 30, 2022.~~

Below is an analysis of the consolidated allowance for credit losses for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and the year-ended December 31, ~~2021:~~2022:


		September 30, 2022			September 30, 2021			December 31, 2021				March 31, 2023			March 31, 2022			December 31, 2022
		(dollars in thousands)										(dollars in thousands)
Balance, beginning of period	Balance, beginning of period	$	92,522		$	101,309		$	101,309		Balance, beginning of period	$	102,906		$	92,522		$	92,522

Day 1 allowance for credit loss on PCD acquired loans											Day 1 allowance for credit loss on PCD acquired loans	22,079			—			—
Provision for credit losses - acquisition day 1 non-PCD											Provision for credit losses - acquisition day 1 non-PCD	10,653			—			—
Loans charged off:	Loans charged off:										Loans charged off:
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	1,836			6,522			7,020			Commercial, financial, agricultural and other	663			475			2,361
Real estate construction	Real estate construction	—			—			9			Real estate construction	—			—			—
Residential real estate	Residential real estate	263			130			309			Residential real estate	79			139			339
Commercial real estate	Commercial real estate	1,887			1,659			1,659			Commercial real estate	—			—			2,487
Loans to individuals	Loans to individuals	3,113			3,199			4,061			Loans to individuals	1,141			1,009			4,658
Total loans charged off	Total loans charged off	7,099			11,510			13,058			Total loans charged off	1,883			1,623			9,845
Recoveries of loans previously charged off:	Recoveries of loans previously charged off:										Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	313			299			2,430			Commercial, financial, agricultural and other	159			80			394
Real estate construction	Real estate construction	9			135			155			Real estate construction	—			—			9
Residential real estate	Residential real estate	143			309			468			Residential real estate	38			29			187
Commercial real estate	Commercial real estate	351			130			135			Commercial real estate	42			14			769
Loans to individuals	Loans to individuals	1,160			1,163			1,460			Loans to individuals	471			366			1,349
Total recoveries	Total recoveries	1,976			2,036			4,648			Total recoveries	710			489			2,708
Net charge-offs	Net charge-offs	5,123			9,474			8,410			Net charge-offs	1,173			1,134			7,137
Provision for credit losses on loans charged to expense		8,694			2,350			(377)
Provision for credit losses on loans and leases charged to expense											Provision for credit losses on loans and leases charged to expense	(580)			(200)			17,521
Balance, end of period	Balance, end of period	$	96,093		$	94,185		$	92,522		Balance, end of period	$	133,885		$	91,188		$	102,906
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.10		%	0.19		%	0.12		%	Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.06		%	0.07		%	0.10		%
Allowance for credit losses as a percentage of end-of-period loans outstanding		1.31		%	1.40		%	1.35		%
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans		1.31		%	1.43		%	1.37		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding											Allowance for credit losses as a percentage of end-of-period loans and leases outstanding	1.55		%	1.31		%	1.35		%

6259

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Income

The following table presents the components of noninterest income for the ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
		(dollars in thousands)									(dollars in thousands)
Noninterest Income:	Noninterest Income:									Noninterest Income:
Trust income	Trust income	$	8,063	$	8,340	$	(277)	(3)	%	Trust income	$	2,486	$	2,713	$	(227)	(8)	%
Service charges on deposit accounts	Service charges on deposit accounts	14,695		13,127		1,568		12		Service charges on deposit accounts	4,918		4,615		303		7
Insurance and retail brokerage commissions	Insurance and retail brokerage commissions	6,806		6,368		438		7		Insurance and retail brokerage commissions	2,552		2,272		280		12
Income from bank owned life insurance	Income from bank owned life insurance	4,310		4,946		(636)		(13)		Income from bank owned life insurance	1,227		1,508		(281)		(19)
Card-related interchange income	Card-related interchange income	20,607		20,885		(278)		(1)		Card-related interchange income	6,829		6,490		339		5
Swap fee income	Swap fee income	3,933		1,715		2,218		129		Swap fee income	245		453		(208)		(46)
Other income	Other income	6,749		6,022		727		12		Other income	2,057		1,975		82		4
Subtotal	Subtotal	65,163		61,403		3,760		6		Subtotal	20,314		20,026		288		1
Net securities gains	Net securities gains	2		16		(14)		(88)		Net securities gains	—		2		(2)		(100)
Gain on sale of mortgage loans	Gain on sale of mortgage loans	4,328		11,615		(7,287)		(63)		Gain on sale of mortgage loans	652		1,282		(630)		(49)
Gain on sale of other loans and assets	Gain on sale of other loans and assets	4,511		6,281		(1,770)		(28)		Gain on sale of other loans and assets	2,086		2,319		(233)		(10)
Derivatives mark to market	Derivatives mark to market	395		1,371		(976)		(71)		Derivatives mark to market	(89)		347		(436)		(126)

Total noninterest income	Total noninterest income	$	74,399	$	80,686	$	(6,287)	(8)	%	Total noninterest income	$	22,963	$	23,976	$	(1,013)	(4)	%

Total noninterest income, excluding net securities gains, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$3.8~~$0.3 million, or 6%1%, compared to the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Service charges on deposit accounts and card-related interchange income both increased ~~$1.6~~$0.3 million as a result of increased customer activity began to return to pre-COVID levels and swap fee income increased $2.2 million due to growth in interest rate swaps entered into for our commercial customers. Other income increased $0.7 million primarily due to income related to limited partnership investments and insuranceactivity. Insurance and retail brokerage commissions ~~income~~ increased ~~$0.4~~$0.3 million due to growth in annuity sales. Trust income decreased ~~$0.3~~$0.2 million as a result of declines in the value of assets under management, ~~and~~ income from bank owned life insurance decreased ~~$0.6~~$0.3 million compared to the prior period primarily due to ~~recognition~~changes in market interest rates and swap fee income declined $0.2 million due to a lower volume of ~~a benefit during~~interest rate swaps entered into by our commercial loan customers. For the ~~nine~~three months ended ~~September 30, 2021, with no similar benefit during~~March 31, 2023, $0.1 million in non-interest income can be attributed to the ~~nine months ended September 30, 2022.~~Centric acquisition.

Total noninterest income decreased ~~$6.3~~$1.0 million, or 8%4%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a ~~$7.3~~$0.6 million decrease in gain on sale of mortgage loans as a result of changes in volume and the spread received on mortgage loans sold. The mark to market adjustment on interest rate swaps entered into for our commercial loan customers decreased ~~$1.0~~$0.4 million. This adjustment does not reflect a realized gain or loss on the swaps, but rather relates to changes in fair value due to movements in corporate bond spreads and swap rates. The gain on sale of other loans and assets decreased ~~$1.8~~$0.2 million due to a lower volume of loans, primarily SBA loans, being sold in the first ~~nine~~three months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

6360

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Expense

The following table presents the components of noninterest expense for the ~~nine~~three months ended ~~September 30:~~March 31:


		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
		(dollars in thousands)									(dollars in thousands)
Noninterest Expense:	Noninterest Expense:									Noninterest Expense:
Salaries and employee benefits	Salaries and employee benefits	$	94,367	$	88,084	$	6,283	7	%	Salaries and employee benefits	$	34,264	$	30,932	$	3,332	11	%
Net occupancy	Net occupancy	13,586		12,614		972		8		Net occupancy	5,018		4,787		231		5
Furniture and equipment	Furniture and equipment	11,592		11,866		(274)		(2)		Furniture and equipment	4,238		3,730		508		14
Data processing	Data processing	10,379		9,440		939		10		Data processing	3,404		3,188		216		7
Advertising and promotion	Advertising and promotion	3,938		3,829		109		3		Advertising and promotion	1,663		1,226		437		36

Pennsylvania shares tax	Pennsylvania shares tax	3,487		3,347		140		4		Pennsylvania shares tax	1,252		1,005		247		25
Intangible amortization	Intangible amortization	2,470		2,597		(127)		(5)		Intangible amortization	1,147		862		285		33

Other professional fees and services	Other professional fees and services	3,622		3,150		472		15		Other professional fees and services	1,591		1,221		370		30
FDIC insurance	FDIC insurance	2,196		1,964		232		12		FDIC insurance	1,417		698		719		103

Other operating	Other operating	23,003		19,316		3,687		19		Other operating	8,062		7,400		662		9
Subtotal	Subtotal	168,640		156,207		12,433		8		Subtotal	62,056		55,049		7,007		13
Loss on sale or write-down of assets	Loss on sale or write-down of assets	215		223		(8)		(4)		Loss on sale or write-down of assets	41		75		(34)		(45)

Merger and acquisition related	Merger and acquisition related	448		—		448		N/A		Merger and acquisition related	8,541		—		8,541		N/A
COVID-19 related		118		357		(239)		(67)

Branch consolidation		(104)		18		(122)		(678)

Litigation and operational losses	Litigation and operational losses	1,987		1,624		363		22		Litigation and operational losses	743		600		143		24
Total noninterest expense	Total noninterest expense	$	171,304	$	158,429	$	12,875	8	%	Total noninterest expense	$	71,381	$	55,724	$	15,657	28	%

Noninterest expense increased ~~$12.9~~$15.7 million, or 8%28%, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~2022. Contributing to the increase in expense in ~~2022~~2023 is ~~a $6.3~~$8.5 million ~~increase~~ in merger-related expenses associated with the Centric acquisition. Additionally, salaries and employee benefits increased $3.3 million primarily due to ~~annual merit increases and an increase in~~ the number of full time equivalent employees, which increased from ~~1,409~~1,432 at ~~September 30, 2021~~March 31, 2022 to ~~1,422~~1,536 at ~~September 30, 2022. Net occupancy increased $1.0 million primarily~~March 31, 2023, largely due to ~~higher building repairs~~the Centric acquisition. Additionally, increases in net occupancy, furniture and ~~maintenance costs.~~equipment and intangible amortization all reflected increases as a result of Centric. Data processing costs increased ~~$0.9~~$0.2 million due to continued investment in our digital banking and other product offerings. Contributing to the increase in other operating expenses were several expense categories, including, ~~credit reporting,~~ travel, interview and placement, telephone and ~~subscriptions,~~operational losses, none of which were individually significant.

~~In October 2022,~~FDIC insurance increased $0.7 million due to both the ~~FDIC adopted~~impact of Centric as well as a ~~final rule to~~2 basis point increase in the FDIC deposit insurance assessment rate ~~by 2 basis points beginning with~~which began in the first quarterly assessment period of 2023. ~~This~~The assessment rate increase is estimated to increase the Company's annual FDIC assessment by approximately $1.7 million.

Income Tax

The provision for income taxes ~~decreased $2.9~~increased $1.0 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to the corresponding period in ~~2021,~~2022, due to the ~~decrease~~increase in income before income taxes.

We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an ~~annual~~ effective tax rate of ~~19.8%~~20.3% and ~~19.9%~~19.5% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

As of ~~September 30, 2022,~~March 31, 2023, our deferred tax assets totaled ~~$62.7~~$69.7 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.

6461

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

~~Results of Operations~~

~~Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021~~

~~Net Income~~

For the three months ended September 30, 2022, First Commonwealth recognized net income of $34.0 million, or $0.36 diluted earnings per share, compared to net income of $34.1 million, or $0.36 diluted earnings per share, in the three months ended September 30, 2021. The decrease in net income was primarily the result of a $5.6 million increase in the provision for credit losses, $4.9 million increase in noninterest expense and a $1.3 million decrease in noninterest income all of which was partially offset by a $11.7 million increase in net interest income.

For the three months ended September 30, 2022, the Company’s return on average equity was 12.67% and its return on average assets was 1.41%, compared to 12.14% and 1.42%, respectively, for the three months ended September 30, 2021.

~~Net Interest Income~~

Net interest income, on a fully taxable equivalent basis, was $82.6 million in the third quarter of 2022, compared to $70.9 million for the same period in 2021. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 76.1% and 72.2% for the three months ended September 30, 2022 and 2021, respectively.

The net interest margin, on a fully taxable equivalent basis, was 3.76% and 3.23% for the three months ended September 30, 2022 and September 30, 2021, respectively. The increase in the net interest margin is attributable to both 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 3.92% for the three months ended September 30, 2022, an increase of 53 basis points compared to the 3.39% yield for the same period in 2021. This is largely due to a 35 basis point increase in the loan portfolio yield when compared to the three months ended September 30, 2021 as a result of a higher interest rate environment in 2022. Also impacting the yield on loans was PPP loans originated under the CARES Act, which have a stated rate of 1% and a yield of 14.61% during the three months ended September 30, 2022. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $0.2 million. These loans increased the average balance of loans by $7.2 million and generated $0.3 million in income for the third quarter of 2022, resulting in a 1 basis point increase in the yield on loans and no impact on the net interest margin. During the third quarter of 2021, PPP loans generated $5.7 million in income and increased the average balance of loans by $225.3 million resulting in a 21 basis point increase in the yield on loans and an 18 basis point increase in the net interest margin.

The cost of interest-bearing liabilities decreased to 0.24% for the three months ended September 30, 2022, from 0.25% for the same period in 2021, primarily due to a decrease in the cost of time deposits and savings deposits. Strategies to manage deposit costs lowered the average rate on savings deposits by 2 basis points and the maturity of higher costing time deposits provided a decrease of 12 basis points in comparison to the same period last year.

For the three months ended September 30, 2022, changes in interest rates positively impacted net interest income by $7.9 million when compared with the same period in 2021. The higher yield on loans contributed to interest-earning assets positively impacting net interest income by $7.8 million, while a decrease in the cost of interest-bearing liabilities positively impacted net interest income by $0.1 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $3.8 million during the three months ended September 30, 2022, as compared to the same period in 2021. The mix of interest-earning assets resulted in an increase of $3.7 million in interest income while changes in the volume and mix of interest-bearing liabilities decreased interest expense by $0.1 million. Average interest-earning assets for the three months ended September 30, 2022 increased $7.0 million, or 0.1%, compared to the same period in 2021. Average loans for the comparable period increased $498.1 million, or 7.4%.

Net interest income also benefited from a $52.0 million increase in average net free funds at September 30, 2022 as compared to September 30, 2021. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of $99.2 million, or 3.7%, in noninterest-bearing demand deposit average balances. Average time deposits for the three months ended September 30, 2022 decreased by $80.9 million compared to the comparable period in 2021, decreasing interest expense by $0.1 million.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

2022 2021
(dollars in thousands)
Interest income per Consolidated Statements of Income $ 85,700 $ 74,196
Adjustment to fully taxable equivalent basis 261 235
Interest income adjusted to fully taxable equivalent basis (non-GAAP) 85,961 74,431
Interest expense 3,340 3,551
Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 82,621 $ 70,880

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

2022 2021
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 $ 106,841 $ 577 2.14 % $ 323,414 $ 130 0.16 %
Tax-free investment securities 22,584 147 2.58 27,360 180 2.61
Taxable investment securities 1,316,890 6,284 1.89 1,586,611 6,665 1.67
Loans and leases, net of unearned income (b)(c) 7,261,790 78,953 4.31 6,763,739 67,456 3.96
Total interest-earning assets 8,708,105 85,961 3.92 8,701,124 74,431 3.39
Noninterest-earning assets:
Cash 106,038 94,811
Allowance for credit losses (95,385) (102,503)
Other assets 815,336 809,069
Total noninterest-earning assets 825,989 801,377
Total Assets $ 9,534,094 $ 9,502,501
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d) $ 1,603,810 $ 222 0.05 % $ 1,587,855 $ 112 0.03 %
Savings deposits (d) 3,348,469 599 0.07 3,311,473 781 0.09
Time deposits 336,346 207 0.24 417,274 376 0.36
Short-term borrowings 102,073 50 0.19 118,112 19 0.06
Long-term debt 181,596 2,262 4.94 182,623 2,263 4.92
Total interest-bearing liabilities 5,572,294 3,340 0.24 5,617,337 3,551 0.25
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d) 2,746,258 2,647,089
Other liabilities 152,208 124,286
Shareholders’ equity 1,063,334 1,113,789
Total noninterest-bearing funding sources 3,961,800 3,885,164
Total Liabilities and Shareholders’ Equity $ 9,534,094 $ 9,502,501
Net Interest Income and Net Yield on Interest-Earning Assets $ 82,621 3.76 % $ 70,880 3.23 %

~~(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the three months ended September 30, 2022 and 2021.~~

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

~~(c)Loan income includes loan fees earned.~~

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~The following table shows the effect of changes in volumes and rates on interest income and interest expense for the three months ended September 30, 2022 compared with September 30, 2021:~~

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 $ 447 $ (87) $ 534
Tax-free investment securities (33) (31) (2)
Taxable investment securities (381) (1,135) 754
Loans and leases 11,497 4,971 6,526
Total interest income (b) 11,530 3,718 7,812
Interest-bearing liabilities:
Interest-bearing demand deposits 110 1 109
Savings deposits (182) 8 (190)
Time deposits (169) (73) (96)
Short-term borrowings 31 (2) 33
Long-term debt (1) (13) 12
Total interest expense (211) (79) (132)
Net interest income $ 11,741 $ 3,797 $ 7,944

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

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

~~Provision for Credit Losses~~

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

2022 2021
Dollars Percentage Dollars Percentage
(dollars in thousands)
Commercial, financial, agricultural and other $ 1,181 24 % $ (1,644) 286 %
Time and demand 869 18 (1,561) 271
Commercial credit cards 3 — (83) 15
Equipment finance 297 6
Time and demand other 12 —
Real estate construction 1,373 28 48 (8)
Construction other 1,414 29
Construction residential (41) (1)
Residential real estate 1,592 32 (215) 37
Residential first lien 1,161 23 39 (7)
Residential junior lien/home equity 431 9 (254) 44
Commercial real estate (2,485) (50) (1,143) 198
Multifamily 868 18 (548) 95
Nonowner occupied (4,186) (85) (893) 155
Owner occupied 833 17 298 (52)
Loans to individuals 3,290 66 2,378 (413)
Automobile and recreational vehicles 2,979 60 1,984 (344)
Consumer credit cards 244 5 84 (15)
Consumer other 67 1 310 (54)
Provision for credit losses on loans and leases $ 4,951 100 % $ (576) 100 %
Provision for off-balance sheet credit exposure 972 906
Total provision for credit losses $ 5,923 $ 330

The provision for credit losses on loans and leases for the three months ended September 30, 2022 increased in comparison to the three months ended September 30, 2021 by $5.5 million. The level of provision expense in the third quarter of 2022 is primarily the result of an increase in loan balances as well as changes in the economic forecast used in calculation of the allowance for credit losses. These increases were partially offset by declines in qualitative reserves which were provided for several loan categories impacted by COVID-19 . The provision for off-balance sheet credit exposure increased $0.1 million primarily due to the level of unfunded commitments. Net charge-offs for the three months ended September 30, 2022 were $2.5 million.

The level of provision expense in the third quarter of 2021 was primarily the result of an improved economic forecast, which reflected declines in the impact of the COVID-19 pandemic on the economy and expected loan losses. The third quarter 2021 provision expense was also impacted by the release of a $1.1 million specific reserve on a nonaccrual loan that paid off during the third quarter. Net charge-offs for the three months ended September 30, 2021 were $2.3 million.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Below is an analysis of the consolidated allowance for credit losses for the three months ended September 30, 2022 and 2021 and the year-ended December 31, 2021:~~

September 30, 2022 September 30, 2021 December 31, 2021
(dollars in thousands)
Balance, beginning of period $ 93,603 $ 97,038 $ 101,309
Loans charged off:
Commercial, financial, agricultural and other 852 2,066 7,020
Real estate construction — — 9
Residential real estate 119 11 309
Commercial real estate 1,335 102 1,659
Loans to individuals 1,064 727 4,061
Total loans charged off 3,370 2,906 13,058
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other 154 106 2,430
Real estate construction 9 — 155
Residential real estate 83 98 468
Commercial real estate 332 90 135
Loans to individuals 331 335 1,460
Total recoveries 909 629 4,648
Net charge-offs 2,461 2,277 8,410
Provision for credit losses on loans charged to expense 4,951 (576) (377)
Balance, end of period $ 96,093 $ 94,185 $ 92,522

~~Noninterest Income~~

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

2022 2021 $ Change % Change
(dollars in thousands)
Noninterest Income:
Trust income $ 2,777 $ 3,118 $ (341) (11) %
Service charges on deposit accounts 5,194 4,770 424 9
Insurance and retail brokerage commissions 2,048 2,218 (170) (8)
Income from bank owned life insurance 1,419 1,486 (67) (5)
Card-related interchange income 6,980 7,052 (72) (1)
Swap fee income 2,326 317 2,009 634
Other income 2,586 2,101 485 23
Subtotal 23,330 21,062 2,268 11
Gain on sale of mortgage loans 1,485 3,485 (2,000) (57)
Gain on sale of other loans and assets 1,093 2,480 (1,387) (56)
Derivatives mark to market 6 218 (212) (97)
Total noninterest income $ 25,914 $ 27,245 $ (1,331) (5) %

Total noninterest income for the three months ended September 30, 2022 decreased $1.3 million, or 5%, in comparison to the three months ended September 30, 2021. The most significant changes include a $2.0 million decrease in gain on sale of mortgage loans due to changes in the volume and spreads on mortgage loans sold and a $1.4 million decrease in gain on sale of other loans and assets due to a decrease in the volume of SBA loans sold during the quarter. Swap fee income increased $2.0 million due to growth in interest rate swaps entered into for our commercial customers. Additionally, service charges on deposits increased $0.4 million due to growth in customer accounts and transactions.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Noninterest Expense~~

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

2022 2021 $ Change % Change
(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits $ 32,486 $ 31,066 $ 1,420 5 %
Net occupancy 4,629 3,960 669 17
Furniture and equipment 4,005 4,052 (47) (1)
Data processing 3,721 3,196 525 16
Advertising and promotion 1,278 1,150 128 11
Pennsylvania shares tax 1,569 1,257 312 25
Intangible amortization 746 868 (122) (14)
Other professional fees and services 1,204 1,308 (104) (8)
FDIC insurance 796 830 (34) (4)
Other operating 8,168 6,530 1,638 25
Subtotal 58,602 54,217 4,385 8
Loss on sale or write-down of assets 54 171 (117) (68)
Merger and acquisition related 448 — 448 N/A
COVID-19 related 39 50 (11) (22)
Litigation and operational losses 758 589 169 29
Total noninterest expense $ 59,901 $ 55,027 $ 4,874 9 %

Noninterest expense increased $4.9 million, or 9%, for the three months ended September 30, 2022 compared to the same period in 2021. The increase is a result of a $1.4 million increase in salary and employee benefit expense, primarily due to annual merit increases, higher incentive expense and number of employees. Also contributing to higher noninterest expense is a $1.6 million increase in other operating expenses due to several expense categories, including credit reporting and meals and travel, none of which were individually significant. Net occupancy expense increased $0.7 million as a result of higher repairs and maintenance costs and data processing increased $0.5 million due to investments in additional digital and product solutions.

~~Income Tax~~

~~The provision for income taxes increased $0.04 million for the three months ended September 30, 2022, compared to the corresponding period in 2021.~~ ~~The effective tax rate increased 20 basis points from 19.8% for the three months ended September 30, 2021 to 20.0% for the three months ended September 30, 2022.~~

Liquidity

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers as well as our operating cash needs with cost-effective funding. We generate funds to meet these needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first ~~nine~~three months of ~~2022,~~2023, the maturity and redemption of investment securities provided ~~$183.9~~$66.2 million in liquidity. These funds contributed to the liquidity used to originate loans, purchase investment securities and fund depositor withdrawals.

~~We also have available unused wholesale~~The following represents our expanded sources of liquidity ~~including overnight federal funds and repurchase agreements, advances from~~as of March 31, 2023:


	Total Available		Amount Used		Outstanding Letters of Credit		Net Available
	(dollars in thousands)
Internal liquidity sources
Unencumbered securities	$	601,100	$	—	$	—	$	601,100
Other (excess pledged)	43,700		—		—		43,700
External liquidity sources
FHLB advances	2,041,633		204,679		666,800		1,170,154
FRB borrowings	1,081,368		—		—		1,081,368
Lines with other financial institutions	180,000		—		—		180,000

Brokered deposits (1)	1,108,551		18,730		—		1,089,821

Total liquidity	$	5,056,352	$	223,409	$	666,800	$	4,166,143

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

The brokered deposits included in the ~~FHLB~~table above are a result of ~~Pittsburgh, borrowings through the discount window at the Federal Reserve Bank of Cleveland (“FRB”) and access to certificates of deposit through brokers.~~

~~We participate~~our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of ~~September 30, 2022, our maximum borrowing capacity under this program was $1.4 billion, and as~~March 31, 2023, the outstanding balance of ~~that date there was $5.4~~$18.7 million ~~outstanding with~~carried an average weighted rate of ~~0.56%~~3.20% and an average original term of ~~364~~215 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.

~~ITEM 2.~~ ~~Management’s Discussion and Analysis~~Liquidity available through the Federal Reserve is a result of ~~Financial Condition and Results of Operations (Continued)~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~An additional source of liquidity is~~ 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. ~~At September 30, 2022,~~

During the ~~borrowing capacity under this program totaled $1.0 billion and there was no balance outstanding. As~~first quarter of ~~September 30, 2022, our maximum borrowing capacity at~~2023, the Company increased its liquidity by purchasing $519.0 million in letters of credit from the FHLB of Pittsburgh, ~~was $1.9 billion and as~~which were then used to secure public deposits. This resulted in a similar amount of ~~that date amounts used against this capacity included $5.0~~previously pledged securities becoming unencumbered. Additionally, new short-term borrowings in the amount of $250.0 million were entered into in ~~outstanding borrowings and no outstanding letters of credit.~~

We also have available unused federal funds lines with four correspondent banks. These lines have an aggregate commitment of $160.0 million with no outstanding balance as of September 30, 2022. In addition, we have available unused repo lines with two correspondent banks. These lines have an aggregate commitment of $400.0 million with no outstanding balance as of September 30, 2022.

~~First Commonwealth Financial Corporation has an unsecured $20.0 million line of credit with another financial institution. As of September 30, 2022, there are no amounts outstanding on this line.~~order to provide additional on-balance sheet liquidity.

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(dollars in thousands)					(dollars in thousands)
Noninterest-bearing demand deposits(a)	Noninterest-bearing demand deposits(a)	$	2,782,654	$	2,658,782	Noninterest-bearing demand deposits(a)	$	2,698,225	$	2,670,508
Interest-bearing demand deposits(a)	Interest-bearing demand deposits(a)	354,310		291,476		Interest-bearing demand deposits(a)	547,015		357,769
Savings deposits(a)	Savings deposits(a)	4,608,762		4,647,197		Savings deposits(a)	5,127,037		4,572,183
Time deposits	Time deposits	331,923		385,043		Time deposits	862,671		405,009
Total	Total	$	8,077,649	$	7,982,498	Total	$	9,234,948	$	8,005,469

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

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

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

During the first ~~nine~~three months of ~~2022,~~2023, total deposits increased ~~$95.2 million.~~$1.2 billion, of which $757.0 million were acquired as part of the Centric acquisition. Interest-bearing demand and savings deposits increased ~~$24.4~~$744.1 million, noninterest-bearing demand deposits increased ~~$123.9~~$27.7 million and time deposits ~~decreased $53.1~~increased $457.7 million.

The estimated total of uninsured deposits was $2.5 billion at March 31, 2023 and $2.1 billion at December 31, 2022. Additionally, $1.0 billion of uninsured deposits are secured by pledged investment securities or letters of credit. 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 ~~0.77 and 0.84~~0.76 at ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively.~~2022. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.

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

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


	March 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	$	3,508,121		$	396,766		$	684,053		$	4,588,940		$	2,977,254		$	1,025,209
Investments	43,472			38,671			76,338			158,481			442,624			719,901
Other interest-earning assets	282,037			—			—			282,037			—			—
Total interest-sensitive assets (ISA)	3,833,630			435,437			760,391			5,029,458			3,419,878			1,745,110
Certificates of deposit	80,552			87,288			346,430			514,270			347,659			974
Other deposits	5,674,052			—			—			5,674,052			—			—
Borrowings	407,928			204			409			408,541			3,271			50,590
Total interest-sensitive liabilities (ISL)	6,162,532			87,492			346,839			6,596,863			350,930			51,564
Gap	$	(2,328,902)		$	347,945		$	413,552		$	(1,567,405)		$	3,068,948		$	1,693,546
ISA/ISL	0.62			4.98			2.19			0.76			9.75			33.84
Gap/Total assets	20.95		%	3.13		%	3.72		%	14.10		%	27.61		%	15.24		%

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~~

ITEM 2. Management’s Discussion and Analysis of ~~September 30, 2022~~Financial Condition and ~~December 31, 2021:~~ Results of Operations (Continued)

September 30, 2022
0-90 Days 91-180
Days 181-365
Days Cumulative
0-365 Days Over 1 Year
Through 5
Years Over 5
Years
(dollars in thousands)
Loans and leases $ 3,065,808 $ 346,717 $ 545,479 $ 3,958,004 $ 2,378,947 $ 940,237
Investments 45,229 39,214 72,275 156,718 473,331 764,181
Other interest-earning assets 74,619 — — 74,619 — —
Total interest-sensitive assets (ISA) 3,185,656 385,931 617,754 4,189,341 2,852,278 1,704,418
Certificates of deposit 86,683 59,428 87,454 233,565 97,175 1,190
Other deposits 4,963,072 — — 4,963,072 — —
Borrowings 170,302 203 50,405 220,910 3,241 50,990
Total interest-sensitive liabilities (ISL) 5,220,057 59,631 137,859 5,417,547 100,416 52,180
Gap $ (2,034,401) $ 326,300 $ 479,895 $ (1,228,206) $ 2,751,862 $ 1,652,238
ISA/ISL 0.61 6.47 4.48 0.77 28.40 32.66
Gap/Total assets 21.24 % 3.41 % 5.01 % 12.82 % 28.73 % 17.25 %
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

December 31, 2021
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 $ 2,910,172 $ 394,048 $ 606,468 $ 3,910,688 $ 2,296,873 $ 555,022
Investments 98,969 82,267 154,316 335,552 725,576 516,766
Other interest-earning assets 310,629 — — 310,629 — —
Total interest-sensitive assets (ISA) 3,319,770 476,315 760,784 4,556,869 3,022,449 1,071,788
Certificates of deposit 97,269 72,453 106,243 275,965 107,795 1,232
Other deposits 4,938,673 — — 4,938,673 — —
Borrowings 210,682 200 400 211,282 53,197 51,577
Total interest-sensitive liabilities (ISL) 5,246,624 72,653 106,643 5,425,920 160,992 52,809
Gap $ (1,926,854) $ 403,662 $ 654,141 $ (869,051) $ 2,861,457 $ 1,018,979
ISA/ISL 0.63 6.56 7.13 0.84 18.77 20.30
Gap/Total assets 20.19 % 4.23 % 6.85 % 9.10 % 29.98 % 10.68 %


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

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

Net interest income change (12 months) for basis point movements of:
-200 -100 +100 +200
(dollars in thousands)
September 30, 2022 ($) $ (12,280) $ (5,036) $ 4,542 $ 8,488
September 30, 2022 (%) (3.42) % (1.40) % 1.26 % 2.36 %
December 31, 2021 ($) $ (9,008) $ (4,976) $ 5,956 $ 10,224
December 31, 2021 (%) (3.25) % (1.79) % 2.15 % 3.69 %

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
March 31, 2023 ($)	$	(14,089)		$	(6,584)		$	7,008		$	13,374
March 31, 2023 (%)	(3.41)		%	(1.59)		%	1.70		%	3.24		%

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

The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.
Net interest income change (12 months) for basis point movements of:
-200 -100 +100 +200
(dollars in thousands)
September 30, 2022 ($) $ (48,935) $ (21,791) $ 14,047 $ 26,657
September 30, 2022 (%) (13.62) % (6.06) % 3.91 % 7.42 %
December 31, 2021 ($) $ (26,120) $ (17,640) $ 13,867 $ 29,192
December 31, 2021 (%) (9.42) % (6.36) % 5.00 % 10.53 %


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
March 31, 2023 ($)	$	(51,158)		$	(23,531)		$	22,066		$	42,563
March 31, 2023 (%)	(12.38)		%	(5.70)		%	5.34		%	10.30		%

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

The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment. Results of the 100 and 200 basis point interest rate decline scenario are affected by the fact that many of our interest-bearing liabilities are at rates below 1%, with an assumed floor of zero in the model. In the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the cost of our interest-bearing liabilities averaged ~~0.22%~~1.27% and ~~0.29%~~0.22%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged ~~3.59%~~4.86% and ~~3.45%~~3.33%, 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.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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 ~~$9.7~~$8.2 million at ~~September 30, 2022~~March 31, 2023 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

Nonperforming loans include nonaccrual loans and loans classified as troubled debt restructurings. Nonaccrual loans represent loans on which interest accruals have been discontinued. Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower, who could not obtain comparable terms from alternative financing sources. In the first nine months of 2022, two loans totaling $0.1 million were identified as troubled debt restructurings.

The balance of troubled debt restructured loans decreased $5.1 million from December 31, 2021. Changes during the first nine months of 2022 can be attributed to the pay off and paydown of troubled debt loans, $3.1 million of which relates to the paydown of one commercial real estate relationship. Please refer to Note 8 “Loans and Allowance for Credit Losses,” for additional information on troubled debt restructurings.

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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, ~~decreased $19.5~~increased $8.7 million to ~~$35.7~~$44.2 million at ~~September 30, 2022~~March 31, 2023, compared to ~~$55.2~~$35.5 million at December 31, ~~2021. During~~2022. The increase in nonperforming loans is primarily a result of $14.9 million in loans acquired from Centric, offset by the ~~nine months ended September 30, 2022,~~removal of $6.4 million in accruing TDR's. The TDR's were eliminated as a ~~$14.5 million commercial real estate loan~~result of our adoption of ASU 2022-02. The adoption of this guidance was removed from nonaccrual status and paid off in full. In addition, the aforementioned paydown on troubled debt restructured loans also decreased the balance of nonaccrual loans by $3.1 million as did a partial charge-off of one commercial relationship of $0.8 million and the pay-off of one commercial real estate relationship of $0.7 million. During the same period $4.2 million of loans were moved to nonaccrual.effective January 1, 2023.

The allowance for credit losses as a percentage of nonperforming loans was ~~269.23%~~302.67% as of ~~September 30, 2022,~~March 31, 2023, compared to ~~167.67%~~289.98% at December 31, ~~2021,~~2022, and ~~247.30%~~243.38% at ~~September 30, 2021.~~March 31, 2022. The amount of individually assessed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals and updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of ~~$1.5~~$14.7 million and general reserves of ~~$94.6~~$112.1 million as of ~~September 30, 2022.~~March 31, 2023. Specific reserves increased ~~$1.1~~$14.0 million from December 31, ~~2021,~~2022, and ~~$0.6~~$14.4 million from ~~September 30, 2021. Management believes that the allowance for credit losses is at~~March 31, 2022 as a ~~level deemed sufficient to absorb losses inherent in the loan portfolio at September 30, 2022.~~result of individually analyzed PCD loans acquired from Centric.

Criticized loans totaled ~~$139.3~~$189.9 million at ~~September 30, 2022~~March 31, 2023 and represented 2% of the loan portfolio. The level of criticized loans ~~decreased~~increased as of ~~September 30, 2022~~March 31, 2023 when compared to December 31, ~~2021,~~2022, by ~~$58.9~~$57.0 million, or ~~30%~~43%. Classified loans totaled ~~$45.7~~$77.0 million at ~~September 30, 2022~~March 31, 2023 compared to ~~$77.6~~$44.4 million at December 31, ~~2021, a decrease~~2022, an increase of ~~$31.9~~$32.5 million, or ~~41%~~73%. The ~~decrease~~increase in criticized loans is the result of PCD loans acquired as part of the ~~aforementioned changes in nonperforming loans as well as credit upgrades on borrowers, primarily in the hospitality sector.~~Centric acquisition.

The allowance for credit losses was ~~$96.1~~$133.9 million at ~~September 30, 2022,~~March 31, 2023, or ~~1.31%~~1.55% of total loans and leases outstanding, compared to 1.35% reported at December 31, ~~2021,~~2022, and ~~1.40%~~1.31% at ~~September 30, 2021.~~March 31, 2022. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were ~~1.29%~~1.38% at ~~September 30, 2022~~March 31, 2023 compared to ~~1.36%~~1.34% at December 31, 2021 and 1.39% at September 30, 2021. The decrease in the percentage of general reserve from December 31, 2021 and September 30, 2021 are reflective of changes in the economic forecast used to estimate future loan losses at September 30, 2022 and ~~lower qualitative reserves related to industries impacted by COVID-19.~~1.31% at March 31, 2022.

7566

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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


		September 30,								December 31, 2021								March 31,								December 31, 2022
		2022				2021													2023				2022
		(dollars in thousands)														(dollars in thousands)
Nonperforming Loans:	Nonperforming Loans:													Nonperforming Loans:
Loans on nonaccrual basis	Loans on nonaccrual basis	$	20,495			$	14,466				$	34,926					Loans on nonaccrual basis		$	44,234			$	20,490			$	20,193

Troubled debt restructured loans on nonaccrual basis	Troubled debt restructured loans on nonaccrual basis	8,981				16,210					13,134						Troubled debt restructured loans on nonaccrual basis						10,090				8,852
Troubled debt restructured loans on accrual basis	Troubled debt restructured loans on accrual basis	6,216				7,410					7,120						Troubled debt restructured loans on accrual basis						6,887				6,442
Total nonperforming loans	Total nonperforming loans	$	35,692			$	38,086				$	55,180					Total nonperforming loans		$	44,234			$	37,467			$	35,487
Loans past due 30 to 90 days and still accruing	Loans past due 30 to 90 days and still accruing	$	7,857			$	7,138				$	8,911					Loans past due 30 to 90 days and still accruing		$	15,809			$	22,692			$	17,949
Loans past due in excess of 90 days and still accruing	Loans past due in excess of 90 days and still accruing	$	1,548			$	1,135				$	1,606					Loans past due in excess of 90 days and still accruing		$	1,440			$	1,921			$	1,991
Other real estate owned	Other real estate owned	$	322			$	502				$	642					Other real estate owned		$	424			$	667			$	534
Loans held for sale at end of period	Loans held for sale at end of period	$	13,811			$	19,925				$	18,583					Loans held for sale at end of period		$	11,050			$	10,506			$	11,869
Portfolio loans and leases outstanding at end of period	Portfolio loans and leases outstanding at end of period	$	7,348,917			$	6,732,580				$	6,839,230					Portfolio loans and leases outstanding at end of period		$	8,656,945			$	6,952,112			$	7,642,143
Average loans and leases outstanding	Average loans and leases outstanding	$	7,065,213		(a)	$	6,772,239		(a)		$	6,777,192			(b)		Average loans and leases outstanding		$	8,301,449		(a)	$	6,893,628		(a)	$	7,172,624		(b)
Nonperforming loans as a percentage of total loans and leases	Nonperforming loans as a percentage of total loans and leases	0.48		%		0.56		%			0.81		%				Nonperforming loans as a percentage of total loans and leases		0.51		%		0.54		%		0.46		%
Provision for credit losses on loans and leases	Provision for credit losses on loans and leases	$	8,694		(a)	$	2,350		(a)		$	(377)			(b)		Provision for credit losses on loans and leases		$	(580)		(a)	$	(200)		(a)	$	17,521		(b)
Provision for credit losses - acquisition day 1 non-PCD																	Provision for credit losses - acquisition day 1 non-PCD		$	10,653			$	—			$	—
Allowance for credit losses	Allowance for credit losses	$	96,093			$	94,185				$	92,522					Allowance for credit losses		$	133,885			$	91,188			$	102,906
Net charge-offs	Net charge-offs	$	5,123		(a)	$	9,474		(a)		$	8,410			(b)		Net charge-offs		$	1,173		(a)	$	1,134		(a)	$	7,137		(b)
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.10		%		0.19		%			0.12		%				Net charge-offs as a percentage of average loans and leases outstanding (annualized)		0.06		%		0.07		%		0.10		%
Provision for credit losses as a percentage of net charge-offs		169.71		%	(a)	24.80		%	(a)		(4.48)		%		(b)
Provision for credit losses as a percentage of net charge-offs (e)																	Provision for credit losses as a percentage of net charge-offs (e)		(49.45)		%	(a)	(17.64)		%	(a)	245.50		%	(b)
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	1.31		%		1.40		%			1.35		%				Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)		1.55		%		1.31		%		1.35		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans (c)		1.31		%		1.43		%			1.37		%

Allowance for credit losses as a percentage of nonperforming loans (d)	Allowance for credit losses as a percentage of nonperforming loans (d)	269.23		%		247.30		%			167.67		%				Allowance for credit losses as a percentage of nonperforming loans (d)		302.67		%		243.38		%		289.98		%

(a)For the ~~nine-month~~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:


		September 30, 2022				December 31, 2021					March 31, 2023								December 31, 2022
		Amount		%		Amount		%			Originated		Acquired (1)		Total		%		Amount		%
		(dollars in thousands)									(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	1,169,206	16	%	$	1,173,452	17	%	Commercial, financial, agricultural and other	$	1,226,466	$	244,613	$	1,471,079	17	%	$	1,211,706	16	%
Real estate construction	Real estate construction	422,690		6		494,456		7		Real estate construction	460,787		81,115		541,902		6		513,101		7
Residential real estate	Residential real estate	2,153,904		29		1,920,250		28		Residential real estate	2,235,351		88,516		2,323,867		27		2,194,669		29
Commercial real estate	Commercial real estate	2,393,276		33		2,251,097		33		Commercial real estate	2,458,810		533,120		2,991,930		35		2,425,012		31
Loans to individuals	Loans to individuals	1,209,841		16		999,975		15		Loans to individuals	1,327,504		663		1,328,167		15		1,297,655		17
Total loans and leases, net of unearned income	Total loans and leases, net of unearned income	$	7,348,917	100	%	$	6,839,230	100	%	Total loans and leases, net of unearned income	$	7,708,918	$	948,027	$	8,656,945	100	%	$	7,642,143	100	%

(1) Includes loans acquired as part of the Centric acquisition plus day 1 gross up of PCD loans.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, originated loans and leases increased ~~$509.7~~$66.8 million, or ~~7.5%~~0.9%, compared to balances outstanding at December 31, ~~2021.~~

~~Real estate construction loans decreased $71.8~~2022. As provided in the table above, the acquisition of Centric accounted for $948.0 million ~~or 14.5%, primarily due to~~of loan growth during the ~~completion~~first quarter of commercial real estate construction projects. Residential real estate grew $233.7 million, or 12.2%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $142.2 million, or 6.3%, primarily due to growth in loans2023.

7667

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Excluding the impact of Centric, real estate construction loans decreased $52.3 million, or 10.2%, due to the completion of commercial real estate projects. Residential real estate grew $40.7 million, or 1.9%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $33.8 million, or 1.4%, primarily due to growth in loans secured by nonresidential property due in part to the completion of several construction projects. Loans to individuals increased ~~$209.9~~$29.8 million, or ~~21.0%~~2.3%, primarily due to growth in the indirect auto and recreational vehicle portfolio. Commercial, financial, agricultural and other loans increased $14.8 million, as a result of $29.5 million in growth in the equipment finance portfolio.

As indicated in the table below, commercial ~~real estate, residential~~ real estate and commercial, financial and agricultural and other loans represent a significant portion of the nonperforming loans as of ~~September 30, 2022. See discussions related to the provision for credit losses and loans for more information.~~March 31, 2023.


		For the Nine Months Ended September 30, 2022						As of September 30, 2022							For the Three Months Ended March 31, 2023						As of March 31, 2023
		Net Charge- offs		% of Total Net Charge-offs		Net Charge- offs as a % of Average Loans (annualized)		Nonperforming Loans		% of Total Nonperforming Loans		Nonperforming Loans as a % of Total Loans			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)													(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	1,523	29.73	%	0.03	%	$	4,761	13.34	%	0.06	%	Commercial, financial, agricultural and other	$	504	42.97	%	0.03	%	$	12,364	27.95	%	0.14	%
Real estate construction	Real estate construction	(9)		(0.18)		—		—		—		—		Real estate construction	—		—		—		—		—		—
Residential real estate	Residential real estate	120		2.35		—		8,711		24.41		0.12		Residential real estate	41		3.49		—		7,656		17.31		0.09
Commercial real estate	Commercial real estate	1,536		29.98		0.03		21,745		60.92		0.29		Commercial real estate	(42)		(3.58)		—		23,785		53.77		0.28
Loans to individuals	Loans to individuals	1,953		38.12		0.04		475		1.33		0.01		Loans to individuals	670		57.12		0.03		429		0.97		—
Total loans and leases, net of unearned income	Total loans and leases, net of unearned income	$	5,123	100.00	%	0.10	%	$	35,692	100.00	%	0.48	%	Total loans and leases, net of unearned income	$	1,173	100.00	%	0.06	%	$	44,234	100.00	%	0.51	%

Net charge-offs for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 totaled ~~$5.1~~$1.2 million, compared to ~~$9.5~~$1.1 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The most significant charge-offs during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 included ~~$2.0~~$0.7 million related to loans to individuals, primarily indirect auto loans and personal credit lines. See discussions related to the provision for credit losses and loans for more information.

Capital Resources

At ~~September 30, 2022,~~March 31, 2023, shareholders’ equity was ~~$1.0~~$1.2 billion, ~~a decrease~~an increase of ~~$86.8~~$172.9 million from December 31, ~~2021.~~2022. The ~~decrease~~increase was primarily the result of $141.4 million in stock issued as part of the Centric acquisition, $30.2 million in net income and a ~~$133.5~~$13.1 million ~~decline~~increase in the fair value of available for sale investments and interest rate swaps, which are reflected in the Other Comprehensive Income component of capital. Other items impacting capital include ~~$92.4 million in net income, $3.2~~increases due to $2.3 million in treasury stock sales, ~~$33.4~~offset by $12.4 million of dividends paid to shareholders and ~~$15.6~~$1.7 million of common stock repurchases. Cash dividends declared per common share were ~~$0.355~~$0.120 for the ~~nine~~three months ended ~~September 30, 2022 and $0.340 for the nine months ended September 30, 2021.~~March 31, 2023.

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

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

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.

7768

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

During the second quarter of 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. This subordinated debt issuance increased the total risk-based capital ratio by 160 basis points.

As of September 30, 2022, the Company had $4.9 million in PPP loans outstanding under the CARES Act. Because these loans are 100% guaranteed by the SBA, banking regulators confirmed that they have a zero percent risk weight under applicable risk-based capital rules. Additionally, a bank may exclude all PPP loans pledged as collateral to the Federal Reserve's PPP Facility from average total assets when calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility will be included. The PPP loans originated by the Company are included in our leverage ratio as of September 30, 2022, as we did not utilize the PPP Facility.

In March 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the pandemic. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). The Company adopted CECL effective January 1, 2020 and elected to implement the five-year transition. Regulatory capital levels without the capital benefit at ~~September 30, 2022~~March 31, 2023 for both First Commonwealth and First Commonwealth Bank would have continued to be greater than the amounts needed to be considered “well capitalized”, as the transition provided a capital benefit of approximately 79 to 1512 basis points.

As of ~~September 30, 2022,~~March 31, 2023, First Commonwealth and First Commonwealth Bank met all capital adequacy requirements to which they are subject and were considered well-capitalized under the regulatory rules. To be considered well capitalized, the Company must maintain minimum Total risk-based capital, Tier I risk-based capital, Tier I leverage ratio and Common equity tier I risk-based capital as set forth in the table below:


		Actual				Minimum Capital Required			Required to be Considered Well Capitalized					Actual								Minimum Capital Required	Required to be Considered Well Capitalized
		Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount			Ratio			Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
		(dollars in thousands)									(dollars in thousands)
Total Capital to Risk Weighted Assets	Total Capital to Risk Weighted Assets																Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	1,128,312	14.48	%		$	818,184	10.50	%		$	779,223		10.00	%	First Commonwealth Financial Corporation	$	1,254,691	13.82	%		$	953,010	10.50	%	$	907,629	10.00	%
First Commonwealth Bank	First Commonwealth Bank	1,075,065		13.82			816,541		10.50			777,658			10.00		First Commonwealth Bank	1,198,565		13.23			951,248		10.50		905,951		10.00
Tier I Capital to Risk Weighted Assets	Tier I Capital to Risk Weighted Assets																Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	941,477	12.08	%		$	662,340	8.50	%		$	623,379		8.00	%	First Commonwealth Financial Corporation	$	1,046,925	11.53	%		$	771,485	8.50	%	$	726,103	8.00	%
First Commonwealth Bank	First Commonwealth Bank	888,230		11.42			661,009		8.50			622,127			8.00		First Commonwealth Bank	990,799		10.94			770,058		8.50		724,760		8.00
Tier I Capital to Average Assets	Tier I Capital to Average Assets																Tier I Capital to Average Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	941,477	10.09	%		$	373,285	4.00	%		$	466,607		5.00	%	First Commonwealth Financial Corporation	$	1,046,925	10.22	%		$	409,915	4.00	%	$	512,393	5.00	%
First Commonwealth Bank	First Commonwealth Bank	888,230		9.54			372,365		4.00			465,456			5.00		First Commonwealth Bank	990,799		9.69			408,975		4.00		511,219		5.00
Common Equity Tier I to Risk Weighted Assets	Common Equity Tier I to Risk Weighted Assets																Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	871,477	11.18	%		$	545,456	7.00	%		$	506,495		6.50	%	First Commonwealth Financial Corporation	$	976,925	10.76	%		$	635,340	7.00	%	$	589,959	6.50	%
First Commonwealth Bank	First Commonwealth Bank	888,230		11.42			544,361		7.00			505,478			6.50		First Commonwealth Bank	990,799		10.94			634,165		7.00		588,868		6.50

On ~~October 25, 2022,~~April 24, 2023, First Commonwealth Financial Corporation declared a quarterly dividend of ~~$0.12~~$0.125 per share payable on ~~November 18, 2022~~May 19, 2023 to shareholders of record as of ~~November 4, 2022.~~May 5, 2023. The timing and amount of future dividends are at the discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.

In October 2021, a share repurchase program was authorized by the Board of Directors for up to an additional $25.0 million in shares of the Company's common stock. As of ~~September 30, 2022, 1,371,019~~March 31, 2023, 1,392,361 common shares had been repurchased under this program at an average price of $13.92 per share. On April 24, 2023, the Board of Directors authorized a $25 million increase in the share repurchase program.

New Accounting Pronouncements

In March 2020, FASB released Accounting Standards Update (“ASU”) 2020-04 - Reference Rate Reform (Topic 848), which

provides optional guidance to ease the accounting burden in accounting for, or recognizing the effects from, reference rate

reform on financial reporting. The new standard is a result of the discontinuance of the London Interbank Offered Rate

("LIBOR") as an available benchmark rate. The standard is elective and provides optional expedients and exceptions for

applying GAAP to contracts, hedging relationships, or other transactions that reference LIBOR, or another reference rate

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

expected to be discontinued. The Company has elected to apply the practical expedient allowing for a contract modification,

due to reference rate reform, to be accounted for as a continuation of the existing contract and does not require contract

remeasurement at the modification date or reassessment of a previous accounting determination. The amendments in the update

are effective for all entities between March 12, 2020 and December 31, ~~2022.~~2024 (In December 2022, FASB released ASU

2022-06, which extended the original sunset date in ASU 2020-04 from December 31, 2022 to December 31, 2024). The

Company has established a cross-functional working group to manage the Company’s transition from LIBOR. Products that utilize LIBOR have been identified and have incorporated enhanced language to accommodate the transition to alternative reference rates and the use of LIBOR has been discontinued as an index for new loans. The Company continues to evaluate the impact of the LIBOR transition and adopting the new standard.

In October 2021, FASB released ASU 2021-08 – “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, “Revenue from Contracts with Customers.” ASU 2021-08 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The standard should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

In March 2022, FASB released ASU 2022-02 – “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). ASU 2022-22 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) while expanding modification and vintage disclosure requirements. Under the previous guidance a TDR occurs when a loan to a borrower experiencing financial difficulty is restructured with a concession provided that a creditor would not otherwise consider. ASU 2022-02 removes the TDR accounting model, instead requiring modifications to apply existing refinancing and restructuring guidance to determine if the modification results in a new loan or is a continuation of the existing one. The update also requires additional disclosures on the nature, magnitude and subsequent performance of certain types of modifications with borrowers experiencing financial difficulties. ASU 2022-02 further includes a requirement to disclose gross charge-offs incurred by year of origination of the related loan or lease. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. ASU 2022-02 is not expected to have a material impact on the Company's consolidated financial statements, but will result in additional disclosure requirements.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

utilize LIBOR have been identified and have incorporated enhanced language to accommodate the transition to alternative

reference rates and the use of LIBOR has been discontinued as an index for new loans. All LIBOR based loans are expected to

be transitioned to a new index by June 30, 2023. The impact of the LIBOR transition is not expected to have a material impact

on the Company's consolidated financial statements.

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

ITEM 4. Controls and Procedures

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

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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, ~~2021.~~2022, except for the following risk factor.

Risks Related to Recent Events Impacting the Financial Services Industry

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

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

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

On October 26, 2021, a share repurchase program was authorized for up to $25.0 million in shares of the Company's common ~~stock.~~stock with a $25 million increase in October of 2022. The following table details the amount of shares repurchased under this program in the ~~third~~first quarter of ~~2022:~~2023:

Month Ending: Total Number of
Shares
Purchased Average Price
Paid per Share
(or Unit) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Maximum Number
of Shares that
May Yet Be
Purchased Under
the Plans or
Programs*
July 31, 2022 324,551 $ 13.63 324,551 398,914
August 31, 2022 — — — 438,569
September 30, 2022 — — — 460,429
Total 324,551 $ 13.63 324,551
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $14.82 at July 31, 2022, $13.48 at August 31, 2022 and $12.84 at September 30, 2022.


Month Ending:	Total Number of Shares Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs*
January 31, 2023	—	$	—	—	2,099,514
February 28, 2023	—	—		—	1,929,035
March 31, 2023	21,342	13.58		21,342	2,461,312
Total	21,342	$	13.58	21,342

* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $14.71 at January 31, 2023, $16.01 at February 28, 2023 and $12.43 at March 31, 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

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~~PART II – OTHER INFORMATION~~

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

ITEM 6. EXHIBITS

Exhibit
Number

Description

Incorporated by Reference to

~~2.1~~

~~Merger Agreement~~

~~Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed August 30, 2022.~~

10.1

2023 Annual Incentive Plan

Filed herewith

10.2

2023-2025 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: ~~November 7, 2022~~May 10, 2023						/s/ T. Michael Price
						T. Michael Price President and Chief Executive Officer

DATED: ~~November 7, 2022~~May 10, 2023						/s/ James R. Reske
						James R. Reske Executive Vice President, Chief Financial Officer and Treasurer