First Commonwealth Financial (FCF) 10-Q 2024 Q3 Quarterly report

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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, 2024

Or

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

For the transition period from             to            

Commission File Number 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 11, 2024, was 101,782,705.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

INDEX

 

		PAGE
PART I.	Financial Information
ITEM 1.	Financial Statements and Supplementary Data
	Included in Part I of this report:
	First Commonwealth Financial Corporation and Subsidiaries
	Consolidated Statements of Financial Condition (Unaudited)	3
	Consolidated Statements of Income (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Unaudited)	6
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	7
	Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to the Unaudited Consolidated Financial Statements	10
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	89
ITEM 4.	Controls and Procedures	89
PART II.	Other Information
ITEM 1.	Legal Proceedings	90
ITEM 1A.	Risk Factors	90
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
ITEM 3.	Defaults Upon Senior Securities	90
ITEM 4.	Mine Safety Disclosures	90
ITEM 5.	Other Information	90
ITEM 6.	Exhibits	91
	Signatures	92

2

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

	September 30, 2024		December 31, 2023
	(dollars in thousands, except share data)
Assets
Cash and due from banks	$	126,598	$	125,436
Interest-bearing bank deposits	455,711		21,557
Securities available for sale, at fair value	1,140,800		1,020,986
Securities held to maturity, at amortized cost (Fair value of $373,160 and $350,595 at September 30, 2024 and December 31, 2023, respectively)	430,425		419,009
Other investments	24,592		50,871
Loans held for sale	46,785		29,820
Loans and leases:
Portfolio loans and leases	8,965,500		8,968,761
Allowance for credit losses	(126,112)		(117,718)
Net loans and leases	8,839,388		8,851,043
Premises and equipment, net	116,752		121,015
Other real estate owned	669		422
Goodwill	363,715		363,715
Amortizing intangibles, net	20,457		22,820
Bank owned life insurance	228,601		228,479
Other assets	188,706		204,315
Total assets	$	11,983,199	$	11,459,488
Liabilities
Deposits (all domestic):
Noninterest-bearing	$	2,463,971	$	2,388,533
Interest-bearing	7,281,581		6,803,776
Total deposits	9,745,552		9,192,309
Short-term borrowings	538,828		597,835
Subordinated debentures	128,266		177,741
Other long-term debt	3,548		4,122
Capital lease obligation	4,471		4,894
Total long-term debt	136,285		186,757
Other liabilities	152,918		168,313
Total liabilities	10,573,583		10,145,214
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	—		—
Common stock, $1 par value per share, 200,000,000 shares authorized; 123,603,380 shares issued at both September 30, 2024 and December 31, 2023, respectively, and 102,237,941 and 102,114,664 shares outstanding at September 30, 2024 and December 31, 2023, respectively	123,603		123,603
Additional paid-in capital	631,408		630,154
Retained earnings	948,464		881,112
Accumulated other comprehensive loss, net	(83,086)		(111,756)
Treasury stock (21,365,439 and 21,488,716 shares at September 30, 2024 and December 31, 2023, respectively)	(210,773)		(208,839)
Total shareholders’ equity	1,409,616		1,314,274
Total liabilities and shareholders’ equity	$	11,983,199	$	11,459,488

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

3

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(dollars in thousands, except share data)
Interest Income
Interest and fees on loans and leases	$	137,555	$	129,373	$	405,989	$	357,735
Interest and dividends on investments:
Taxable interest	12,381		6,229		34,356		17,652
Interest exempt from federal income taxes	105		114		320		345
Dividends	444		823		1,498		2,110
Interest on bank deposits	3,838		3,346		8,304		7,899
Total interest income	154,323		139,885		450,467		385,741
Interest Expense
Interest on deposits	49,663		32,685		140,387		74,104
Interest on short-term borrowings	6,279		6,643		19,383		14,237
Interest on subordinated debentures	1,786		2,707		6,637		7,175
Interest on other long-term debt	35		41		109		130
Interest on lease obligations	45		52		140		156
Total interest expense	57,808		42,128		166,656		95,802
Net Interest Income	96,515		97,757		283,811		289,939
Provision for credit losses	10,615		5,885		22,680		6,025
Provision for credit losses - acquisition day 1 non-PCD	—		—		—		10,653
Net Interest Income after Provision for Credit Losses	85,900		91,872		261,131		273,261
Noninterest Income
Net securities gains (losses)	88		(103)		(5,447)		(103)
Gain on VISA exchange and sale	106		—		5,664		—
Trust income	3,242		2,949		8,790		7,967
Service charges on deposit accounts	5,840		5,600		16,769		15,842
Insurance and retail brokerage commissions	2,663		2,305		7,618		7,171
Income from bank owned life insurance	2,278		1,242		4,943		3,664
Gain on sale of mortgage loans	1,151		1,270		4,150		3,175
Gain on sale of other loans and assets	2,576		1,027		6,035		5,004
Card-related interchange income	4,137		7,221		17,964		21,422
Derivatives mark to market	(153)		35		(141)		27
Swap fee income	88		452		88		1,029
Other income	2,682		2,828		7,463		7,114
Total noninterest income	24,698		24,826		73,896		72,312
Noninterest Expense
Salaries and employee benefits	38,618		35,640		111,262		106,639
Net occupancy	4,858		4,782		15,014		14,584
Furniture and equipment	4,335		4,414		13,093		12,936
Data processing	3,879		3,857		11,543		11,024
Advertising and promotion	1,960		1,662		4,177		4,652
Pennsylvania shares tax	1,126		1,588		3,454		4,013
Intangible amortization	1,223		1,344		3,656		3,773
Other professional fees and services	1,448		1,603		3,976		4,376
FDIC insurance	1,638		1,920		4,537		4,614
Loss on sale or write-down of assets	132		50		352		97
Litigation and operational losses	2,181		1,626		3,672		3,263
Loss on early redemption of subordinated debt	—		—		369		—
Merger and acquisition related	—		379		114		8,860
Other operating	8,672		8,548		26,222		25,906
Total noninterest expense	70,070		67,413		201,441		204,737

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

4

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(dollars in thousands, except share data)
Income Before Income Taxes	40,528		49,285		133,586		140,836
Income tax provision	8,442		10,054		26,863		28,600
Net Income	$	32,086	$	39,231	$	106,723	$	112,236
Average Shares Outstanding	102,069,233		102,159,213		102,032,702		101,428,065
Average Shares Outstanding Assuming Dilution	102,418,964		102,442,878		102,293,213		101,674,970
Per Share Data: Basic Earnings per Share	$	0.31	$	0.38	$	1.05	$	1.11
Diluted Earnings per Share	$	0.31	$	0.38	$	1.04	$	1.10
Cash Dividends Declared per Common Share	$	0.130	$	0.125	$	0.385	$	0.370

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

5

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,
	2024		2023		2024		2023
	(dollars in thousands)
Net Income	$	32,086	$	39,231	$	106,723	$	112,236
Other comprehensive income (loss), before tax (expense) benefit:
Unrealized holding gains (losses) on securities arising during the period	30,372		(21,389)		18,578		(25,150)
Reclassification adjustment for (gains) losses included in net income	(88)		103		5,447		103
Unrealized holding gains on derivatives arising during the period	8,108		2,111		12,266		4,336
Total other comprehensive income (loss), before tax (expense) benefit	38,392		(19,175)		36,291		(20,711)
Income tax (expense) benefit related to items of other comprehensive income (loss)	(8,062)		3,672		(7,621)		4,349
Total other comprehensive income (loss)	30,330		(15,503)		28,670		(16,362)
Comprehensive Income	$	62,416	$	23,728	$	135,393	$	95,874

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

6

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at December 31, 2023	102,114,664	$	123,603	$	630,154	$	881,112	$	(111,756)	$	(208,839)	$	1,314,274
Net income						106,723						106,723
Other comprehensive income								28,670				28,670
Cash dividends declared ($0.385 per share)						(39,371)						(39,371)
Treasury stock acquired	(303,471)									(4,554)		(4,554)
Treasury stock reissued	230,051			313		—				2,216		2,529
Restricted stock	196,697	—		941		—				404		1,345
Balance at September 30, 2024	102,237,941	$	123,603	$	631,408	$	948,464	$	(83,086)	$	(210,773)	$	1,409,616

	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at December 31, 2022	93,376,314	$	113,915	$	497,431	$	774,863	$	(137,692)	$	(196,443)	$	1,052,074
Net income						112,236						112,236
Other comprehensive loss								(16,362)				(16,362)
Cash dividends declared ($0.370 per share)						(38,050)						(38,050)
Treasury stock acquired	(1,137,475)									(14,105)		(14,105)
Treasury stock reissued	163,950			660		—				1,551		2,211
Restricted stock	93,385	—		488		—				684		1,172
Common stock issuance	9,688,478	9,688		131,667								141,355
Balance at September 30, 2023	102,184,652	$	123,603	$	630,246	$	849,049	$	(154,054)	$	(208,313)	$	1,240,531

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

7

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, 2024	102,297,847	$	123,603	$	630,910	$	929,686	$	(113,416)	$	(208,278)	$	1,362,505
Net income						32,086						32,086
Other comprehensive income								30,330				30,330
Cash dividends declared ($0.130 per share)						(13,308)						(13,308)
Treasury stock acquired	(147,531)									(2,482)		(2,482)
Treasury stock reissued	—			—		—				—		—
Restricted stock	87,625	—		498		—				(13)		485
Balance at September 30, 2024	102,237,941	$	123,603	$	631,408	$	948,464	$	(83,086)	$	(210,773)	$	1,409,616

	Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
	(dollars in thousands, except share and per share data)
Balance at June 30, 2023	102,444,915	$	123,603	$	630,246	$	822,619	$	(138,551)	$	(205,498)	$	1,232,419
Net income						39,231						39,231
Other comprehensive loss								(15,503)				(15,503)
Cash dividends declared ($0.125 per share)						(12,801)						(12,801)
Treasury stock acquired	(260,263)									(3,216)		(3,216)
Treasury stock reissued	—			—		—				—		—
Restricted stock	—	—		—		—				401		401
Balance at September 30, 2023	102,184,652	$	123,603	$	630,246	$	849,049	$	(154,054)	$	(208,313)	$	1,240,531

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

8

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	For the Nine Months Ended
	September 30,
	2024		2023
Operating Activities	(dollars in thousands)
Net income	$	106,723	$	112,236
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses	22,680		16,678
Deferred tax expense	1,888		3,179
Depreciation and amortization	3,629		2,831
Net gains on securities and other assets	(9,714)		(7,701)
Net amortization of premiums and discounts on securities	635		1,052
Loss on early redemption of subordinated debentures	369		—
Income from increase in cash surrender value of bank owned life insurance	(3,935)		(3,627)
Decrease (increase) in interest receivable	2,771		(5,156)
Mortgage loans originated for sale	(185,514)		(137,721)
Proceeds from sale of mortgage loans	162,210		128,270
Increase in interest payable	17,601		3,937
Increase (decrease) in income taxes payable	1,461		(1,905)
Other, net	(4,858)		(5,336)
Net cash provided by operating activities	115,946		106,737
Investing Activities
Transactions with securities held to maturity:
Proceeds from maturities and redemptions	43,400		31,394
Purchases	(55,276)		(200)
Transactions with securities available for sale:
Proceeds from sales	69,598		33,756
Proceeds from maturities and redemptions	140,079		75,593
Purchases	(311,088)		(155,782)
Proceeds from sale of equity securities	5,664		—
Purchases of FHLB stock	(26,117)		(83,218)
Proceeds from the redemption of FHLB stock	51,946		73,311
Proceeds from the redemption of other investments	450		—
Proceeds from bank owned life insurance	3,813		2,246
Proceeds from sale of loans	73,756		110,695
Proceeds from sale of other assets	4,986		2,836
Net cash received from business acquisition	—		14,492
Net increase in loans and leases	(69,614)		(435,093)
Purchases of premises and equipment and other assets	(11,771)		(19,020)
Net cash used in investing activities	(80,174)		(348,990)
Financing Activities
Net decrease in other short-term borrowings	(59,007)		(1,368)
Net increase in deposits	553,269		479,307
Repayments of other long-term debt	(574)		(553)
Repayments of capital lease obligation	(423)		(397)
Repayments of subordinated debentures	(50,000)		—
Dividends paid	(39,371)		(38,050)
Proceeds from reissuance of treasury stock	204		245
Purchase of treasury stock	(4,554)		(14,105)
Net cash provided by financing activities	399,544		425,079
Net increase in cash and cash equivalents	435,316		182,826
Cash and cash equivalents at January 1	146,993		154,244
Cash and cash equivalents at September 30	$	582,309	$	337,070

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

9

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

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

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

The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year of 2024. These interim financial statements should be read in conjunction with First Commonwealth’s 2023 Annual Report on Form 10-K.

Note 2 Acquisition

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

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

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

10

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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

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

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

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

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

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

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

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

11

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides details related to the fair value of acquired PCD loans as of January 31, 2023.

	Unpaid Principal Balance		PCD Allowance for Credit Loss at Acquisition		(Discount) Premium on Acquired Loans		Fair Value of PCD Loans at Acquisition
	(dollars in thousands)
Commercial, financial, agricultural and other	$	84,095	$	(19,417)	$	117	$	64,795
Time and demand	84,095		(19,417)		117		64,795
Real estate construction	29,947		(287)		(479)		29,181
Construction other	16,978		(227)		(179)		16,572
Construction residential	12,969		(60)		(300)		12,609
Residential real estate	16,564		(527)		(496)		15,541
Residential first lien	13,740		(197)		(264)		13,279
Residential junior lien/home equity	2,824		(330)		(232)		2,262
Commercial real estate	174,002		(6,971)		(6,073)		160,958
Multifamily	13,169		(234)		(1,413)		11,522
Non-owner occupied	97,324		(2,739)		(1,902)		92,683
Owner occupied	63,509		(3,998)		(2,758)		56,753
Loans to individuals	62		(3)		(3)		56
Automobile and recreational vehicles	62		(3)		(3)		56
Total loans and leases	$	304,670	$	(27,205)	$	(6,934)	$	270,531

12

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans as of January 31, 2023.

	Unpaid Principal Balance		(Discount) premium on acquired loans		Fair Value of Non-PCD Loans at Acquisition		Day 1 Provision for Credit Losses - Non-PCD Loans
	(dollars in thousands)
Commercial, financial, agricultural and other	$	167,606	$	(5,451)	$	162,155	$	3,482
Time and demand	165,878		(5,342)		160,536		3,436
Equipment finance	4		—		4		—
Time and demand other	1,724		(109)		1,615		46
Real estate construction	52,773		(1,126)		51,647		1,638
Construction other	34,801		(971)		33,830		1,146
Construction residential	17,972		(155)		17,817		492
Residential real estate	75,041		(2,593)		72,448		614
Residential first lien	53,612		(1,981)		51,631		437
Residential junior lien/home equity	21,429		(612)		20,817		177
Commercial real estate	378,777		(12,607)		366,170		4,911
Multifamily	45,475		(1,203)		44,272		514
Non-owner occupied	182,793		(5,660)		177,133		2,111
Owner occupied	150,509		(5,744)		144,765		2,286
Loans to individuals	640		(36)		604		8
Automobile and recreational vehicles	449		(25)		424		4
Consumer other	191		(11)		180		4
Total loans and leases	$	674,837	$	(21,813)	$	653,024	$	10,653

Costs related to the acquisition totaled $9.1 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

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

13

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,
	2024						2023
	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	$	18,578	$	(3,901)	$	14,677	$	(25,150)	$	5,282	$	(19,868)
Reclassification adjustment for losses on securities included in net income	5,447		(1,144)		4,303		103		(22)		81
Total unrealized gains (losses) on securities	24,025		(5,045)		18,980		(25,047)		5,260		(19,787)
Unrealized gains on derivatives:
Unrealized holding gains on derivatives arising during the period	12,266		(2,576)		9,690		4,336		(911)		3,425
Total unrealized gains on derivatives	12,266		(2,576)		9,690		4,336		(911)		3,425
Total other comprehensive income (loss)	$	36,291	$	(7,621)	$	28,670	$	(20,711)	$	4,349	$	(16,362)

	For the Three Months Ended September 30,
	2024						2023
	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	$	30,372	$	(6,377)	$	23,995	$	(21,389)	$	4,138	$	(17,251)
Reclassification adjustment for (gains) losses on securities included in net income	(88)		18		(70)		103		(22)		81
Total unrealized gains (losses) on securities	30,284		(6,359)		23,925		(21,286)		4,116		(17,170)
Unrealized gains on derivatives:
Unrealized holding gains on derivatives arising during the period	8,108		(1,703)		6,405		2,111		(444)		1,667
Total unrealized gains on derivatives	8,108		(1,703)		6,405		2,111		(444)		1,667
Total other comprehensive income (loss)	$	38,392	$	(8,062)	$	30,330	$	(19,175)	$	3,672	$	(15,503)

14

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	2024								2023
	Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)		Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)
	(dollars in thousands)
Balance at December 31	$	(92,340)	$	344	$	(19,760)	$	(111,756)	$	(107,471)	$	268	$	(30,489)	$	(137,692)
Other comprehensive income (loss) before reclassification adjustment	14,677		—		9,690		24,367		(19,868)		—		3,425		(16,443)
Amounts reclassified from accumulated other comprehensive (loss) income	4,303		—		—		4,303		81		—		—		81
Net other comprehensive income (loss) during the period	18,980		—		9,690		28,670		(19,787)		—		3,425		(16,362)
Balance at September 30	$	(73,360)	$	344	$	(10,070)	$	(83,086)	$	(127,258)	$	268	$	(27,064)	$	(154,054)

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

	2024								2023
	Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)		Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)
	(dollars in thousands)
Balance at June 30	$	(97,285)	$	344	$	(16,475)	$	(113,416)	$	(110,088)	$	268	$	(28,731)	$	(138,551)
Other comprehensive income (loss) before reclassification adjustment	23,995		—		6,405		30,400		(17,251)		—		1,667		(15,584)
Amounts reclassified from accumulated other comprehensive (loss) income	(70)		—		—		(70)		81		—		—		81
Net other comprehensive income (loss) during the period	23,925		—		6,405		30,330		(17,170)		—		1,667		(15,503)
Balance at September 30	$	(73,360)	$	344	$	(10,070)	$	(83,086)	$	(127,258)	$	268	$	(27,064)	$	(154,054)

Note 4 Supplemental Cash Flow Disclosures

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

	2024		2023
	(dollars in thousands)
Cash paid during the period for:
Interest	$	148,897	$	92,376
Income taxes	22,946		26,874
Non-cash investing and financing activities:
Loans transferred to other real estate owned and repossessed assets	4,472		2,933
Loans transferred from held to maturity to held for sale	65,427		117,143
Loans transferred from held for sale to held to maturity	(3,127)		(519)
Gross increase (decrease) in market value adjustment to securities available for sale	24,025		(25,047)
Gross increase in market value adjustment to derivatives	12,266		4,336
Increase in limited partnership investment unfunded commitment	—		1,320
Noncash treasury stock reissuance	2,325		1,966
Net assets acquired through acquisition	—		66,477

15

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5 Earnings per Share

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Weighted average common shares issued	123,603,380		123,603,380		123,603,380		122,503,223
Average treasury stock shares	(21,238,907)		(21,222,298)		(21,322,792)		(20,849,426)
Average deferred compensation shares	(57,617)		(56,402)		(57,298)		(56,029)
Average unearned non-vested shares	(237,623)		(165,467)		(190,588)		(169,703)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share	102,069,233		102,159,213		102,032,702		101,428,065
Additional common stock equivalents (non-vested stock) used to calculate diluted earnings per share	292,820		226,939		203,600		190,178
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	56,911		56,726		56,911		56,727
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	102,418,964		102,442,878		102,293,213		101,674,970
Per Share Data:
Basic Earnings per Share	$	0.31	$	0.38	$	1.05	$	1.11
Diluted Earnings per Share	$	0.31	$	0.38	$	1.04	$	1.10

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

	2024					2023
		Price Range					Price Range
	Shares	From		To		Shares	From		To
Restricted Stock	140,439	$	12.39	$	18.08	137,169	$	12.70	$	16.43
Restricted Stock Units	34,700	$	17.09	$	17.09	32,470	$	17.53	$	17.53

Note 6 Commitments and Contingent Liabilities

Commitments and Letters of Credit

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

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

	September 30, 2024		December 31, 2023
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	2,290,477	$	2,517,905
Financial standby letters of credit	14,493		14,300
Performance standby letters of credit	17,926		17,194
Commercial letters of credit	152		555

16

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The notional amounts outstanding as of September 30, 2024 include amounts issued in 2024 of $1.9 million in performance standby letters of credit and $1.2 million in financial standby letters of credit. There were no commercial letters of credit issued in 2024. A liability of $0.2 million and $0.1 million has been recorded as of September 30, 2024 and December 31, 2023, respectively, 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 $4.1 million and $7.3 million as of September 30, 2024 and December 31, 2023, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporates the expected loss percentage calculated for comparable loan categories as part of the allowance for credit losses for loans as well as estimated utilization for each loan category.

Legal Proceedings

First Commonwealth and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. As of September 30, 2024, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against First Commonwealth or its subsidiaries will be material to First Commonwealth’s consolidated financial position. On at least a quarterly basis, First Commonwealth assesses its liabilities and contingencies in connection with such legal proceedings. For those matters where it is probable that First Commonwealth will incur losses and the amounts of the losses can be reasonably estimated, First Commonwealth records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability (if any), is between $0 and $1 million. Although First Commonwealth does not believe that the outcome of pending litigation will be material to First Commonwealth’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations and cash flows for a particular reporting period in the future.

17

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, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	3,209	$	33	$	(126)	$	3,116	$	3,565	$	47	$	(147)	$	3,465
Mortgage-Backed Securities – Commercial	724,019		6,683		(45,868)		684,834		512,979		4,935		(52,521)		465,393
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	434,676		2,236		(53,457)		383,455		559,769		3,052		(68,222)		494,599
Other Government-Sponsored Enterprises	1,000		—		(53)		947		1,000		—		(85)		915
Obligations of States and Political Subdivisions	8,962		2		(785)		8,179		9,226		3		(1,027)		8,202
Corporate Securities	62,347		1,324		(3,402)		60,269		51,886		145		(3,619)		48,412
Total Debt Securities Available for Sale	$	1,234,213	$	10,278	$	(103,691)	$	1,140,800	$	1,138,425	$	8,182	$	(125,621)	$	1,020,986

Mortgage-backed securities include mortgage-backed obligations of U.S. Government agencies and obligations of U.S. Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to approximately 42 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.

18

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, 2024, by contractual maturity, are shown below.

	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	490	$	489
Due after 1 but within 5 years	17,900		18,139
Due after 5 but within 10 years	53,919		50,767
Due after 10 years	—		—
	72,309		69,395
Mortgage-Backed Securities (a)	1,161,904		1,071,405
Total Debt Securities	$	1,234,213	$	1,140,800

(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 $727.2 million and a fair value of $688.0 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $434.7 million and a fair value of $383.5 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

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

	2024		2023
	(dollars in thousands)
Proceeds from sales	$	69,598	$	33,756
Gross gains (losses) realized:
Sales transactions:
Gross gains	$	—	$	—
Gross losses	(5,535)		(103)
	(5,535)		(103)
Maturities
Gross gains	88		—
Gross losses	—		—
	88		—
Net losses	$	(5,447)	$	(103)

For the nine months ended September 30, 2024, proceeds from sales included in above table are a result of management selling $75.1 million in available for sale investment securities yielding 2.17% and reinvesting the proceeds into securities yielding 5.49%.

For the nine months ended September 30, 2023, proceeds from sales included in the above table are a result of the sale of investments acquired as part of the Centric acquisition. All of the acquired investments were recorded at fair value at the time of acquisition and subsequently sold at the same value, with the exception of one corporate security. This security was sold in the third quarter of 2023 at a loss of $103 thousand.

Securities available for sale with an estimated fair value of $895.0 million and $386.5 million were pledged as of September 30, 2024 and December 31, 2023, respectively, to secure public deposits and for other purposes required or permitted by law.

Equity Securities

During the second quarter of 2024, Visa commenced an exchange offer for any and all outstanding shares of its Class B-1 common stock for a combination of Visa's Class B-2 common stock, Class C common stock and, where applicable cash in lieu of fractional shares. As part of this exchange, each share of Class B-1 common stock would be exchanged for one half share of the newly issued Class B-2 common stock and Class C common stock would be issued in an amount equivalent to one half of a share of Class B-1 common stock. The Company opted to participate in this exchange offer prior to its expiration and received

19

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13,340 Class B-2 shares and 5,294 Class C shares. As of September 30, 2024, the Class C shares were sold at fair value resulting in a gain of $5.7 million. The Class B-2 shares will continue to be carried by the company with a zero basis.

The unrealized gains and losses recognized related to equity securities still held at each reporting date is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(dollars in thousands)
Net gains and losses recognized during the period on equity securities	$	106	$	—	$	5,664	$	—
Less: Net gains and losses recognized during the period on equity securities sold during the period	(106)		—		(5,664)		—
Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date	$	—	$	—	$	—	$	—

Securities Held to Maturity

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

	September 30, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	1,604	$	—	$	(151)	$	1,453	$	1,781	$	—	$	(175)	$	1,606
Mortgage-Backed Securities- Commercial	105,996		613		(13,012)		93,597		69,502		—		(14,435)		55,067
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	274,026		—		(39,570)		234,456		296,432		—		(47,148)		249,284
Mortgage-Backed Securities – Commercial	—		—		—		—		2,190		—		(30)		2,160
Other Government-Sponsored Enterprises	22,786		—		(3,426)		19,360		22,543		—		(4,178)		18,365
Obligations of States and Political Subdivisions	25,013		—		(1,704)		23,309		25,561		—		(2,412)		23,149
Debt Securities Issued by Foreign Governments	1,000		—		(15)		985		1,000		—		(36)		964
Total Securities Held to Maturity	$	430,425	$	613	$	(57,878)	$	373,160	$	419,009	$	—	$	(68,414)	$	350,595

20

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 held to maturity at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	1,090	$	1,083
Due after 1 but within 5 years	13,786		13,311
Due after 5 but within 10 years	33,360		28,790
Due after 10 years	563		470
	48,799		43,654
Mortgage-Backed Securities (a)	381,626		329,506
Total Debt Securities	$	430,425	$	373,160

(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 $107.6 million and a fair value of $95.1 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $274.0 million and a fair value of $234.5 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 $394.8 million and $98.1 million were pledged as of September 30, 2024 and December 31, 2023, respectively, to secure public deposits and for other purposes required or permitted by law.

Other Investments

As a member of the Federal Home Loan Bank ("FHLB"), First Commonwealth is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. The level of stock required to be held is dependent on the amount of First Commonwealth's mortgage-related assets and outstanding borrowings with the FHLB. This stock is restricted in that it can 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, 2024 and December 31, 2023, our FHLB stock totaled $18.9 million and $44.7 million, respectively, and is included in “Other investments” on the unaudited Consolidated Statements of Financial Condition.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities during the three and nine months ended September 30, 2024.

As of September 30, 2024 and December 31, 2023, "Other investments" also includes $5.7 million and $6.2 million, respectively, in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the nine-months ended September 30, 2024 and 2023, there were no gains or losses recognized through earnings on these 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.

21

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2024 for both available for sale and held to maturity securities by investment category and time frame for which securities have been in a continuous unrealized loss position:

 

	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	—	$	—	$	3,198	$	(277)	$	3,198	$	(277)
Mortgage-Backed Securities – Commercial	—		—		289,554		(58,880)		289,554		(58,880)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	1,412		(2)		532,114		(93,025)		533,526		(93,027)
Mortgage-Backed Securities – Commercial	—		—		—		—		—		—
Other Government-Sponsored Enterprises	—		—		20,307		(3,479)		20,307		(3,479)
Obligations of States and Political Subdivisions	360		(1)		29,666		(2,488)		30,026		(2,489)
Debt Securities Issued by Foreign Governments	—		—		585		(15)		585		(15)
Corporate Securities	11,134		(965)		16,813		(2,437)		27,947		(3,402)
Total Securities	$	12,906	$	(968)	$	892,237	$	(160,601)	$	905,143	$	(161,569)

At September 30, 2024, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised 96% of total unrealized losses. All unrealized losses are the result of changes in market interest rates. At September 30, 2024, there are 156 debt securities in an unrealized loss position.

22

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the gross unrealized losses and estimated fair values at December 31, 2023 by investment category and the time frame for which securities have been in a continuous unrealized loss position:

	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	—	$	—	$	3,395	$	(322)	$	3,395	$	(322)
Mortgage-Backed Securities - Commercial	—		—		300,642		(66,956)		300,642		(66,956)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	1,124		(3)		643,735		(115,367)		644,859		(115,370)
Mortgage-Backed Securities – Commercial	—		—		2,160		(30)		2,160		(30)
Other Government-Sponsored Enterprises	—		—		19,280		(4,263)		19,280		(4,263)
Obligation of States and Political Subdivisions	2,641		(62)		26,887		(3,377)		29,528		(3,439)
Debt Securities Issued by Foreign Governments	199		(1)		765		(35)		964		(36)
Corporate Securities	11,416		(45)		21,426		(3,574)		32,842		(3,619)
Total Securities	$	15,380	$	(111)	$	1,018,290	$	(193,924)	$	1,033,670	$	(194,035)

As of September 30, 2024, our corporate securities had an amortized cost and an estimated fair value of $62.3 million and $60.3 million, respectively. As of December 31, 2023, our corporate securities had an amortized cost and estimated fair value of $51.9 million and $48.4 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were eight corporate securities, respectively, in an unrealized loss position at both September 30, 2024 and December 31, 2023. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether the unrealized loss position is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.

There was no expected credit related impairment recognized on investment securities during the nine months ended September 30, 2024 and 2023.

23

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 $13.6 million and $8.2 million as of September 30, 2024 and December 31, 2023, respectively, and discounts on purchased loans from acquisitions were $20.1 million and $25.7 million as of September 30, 2024 and December 31, 2023, respectively. The following table provides outstanding balances related to each of our loan types:

 

	September 30, 2024		December 31, 2023
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,629,535	$	1,543,349
Time and demand	1,141,477		1,187,300
Commercial credit cards	12,405		12,906
Equipment finance	366,527		232,944
Time and demand other	109,126		110,199
Real estate construction	540,775		597,735
Construction other	522,548		541,633
Construction residential	18,227		56,102
Residential real estate	2,374,376		2,416,876
Residential first lien	1,698,863		1,739,107
Residential junior lien/home equity	675,513		677,769
Commercial real estate	3,069,438		3,053,152
Multifamily	540,427		551,142
Non-owner occupied	1,803,084		1,772,785
Owner occupied	725,927		729,225
Loans to individuals	1,351,376		1,357,649
Automobile and recreational vehicles	1,275,765		1,277,969
Consumer credit cards	9,610		10,291
Consumer other	66,001		69,389
Total loans and leases	$	8,965,500	$	8,968,761

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

Commercial, financial, agricultural and other

Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

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

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

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

24

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Real estate construction

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

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

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

Residential real estate

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

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

Commercial real estate

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

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

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

Loans to individuals

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

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

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

The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default, and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was 4.26% and during the one-year forecast period it was projected to average 4.87%, with a peak of 5.07%.

25

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Quality Information

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

Pass	Acceptable levels of risk exist in the relationship. Includes all loans not classified as OAEM, substandard or doubtful.
Other Assets Especially Mentioned (OAEM)	Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in deterioration of the repayment prospects or weaken the Company’s credit position at some future date. The credit risk may be relatively minor, yet constitute an undesirable risk in light of the circumstances surrounding the specific credit. No loss of principal or interest is expected.
Substandard	Well-defined weakness or a weakness that jeopardizes the repayment of the debt. A loan may be classified as substandard as a result of deterioration of the borrower’s financial condition and repayment capacity. Loans for which repayment plans have not been met or collateral equity margins do not protect the Company may also be classified as substandard.
Doubtful	Loans with the characteristics of substandard loans with the added characteristic that collection or liquidation in full, on the basis of presently existing facts and conditions, is highly improbable.

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

The following tables represent our credit risk profile by creditworthiness:

	September 30, 2024
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,527,815	$	70,382	$	31,338	$	—	$	—	$	101,720	$	1,629,535
Time and demand	1,042,940		69,135		29,402		—		—		98,537		1,141,477
Commercial credit cards	12,405		—		—		—		—		—		12,405
Equipment finance	363,348		1,243		1,936		—		—		3,179		366,527
Time and demand other	109,122		4		—		—		—		4		109,126
Real estate construction	527,529		51		13,195		—		—		13,246		540,775
Construction other	509,302		51		13,195		—		—		13,246		522,548
Construction residential	18,227		—		—		—		—		—		18,227
Residential real estate	2,362,443		1,454		10,479		—		—		11,933		2,374,376
Residential first lien	1,691,847		1,116		5,900		—		—		7,016		1,698,863
Residential junior lien/home equity	670,596		338		4,579		—		—		4,917		675,513
Commercial real estate	2,954,477		55,324		59,637		—		—		114,961		3,069,438
Multifamily	522,389		17,956		82		—		—		18,038		540,427
Non-owner occupied	1,749,506		13,841		39,737		—		—		53,578		1,803,084
Owner occupied	682,582		23,527		19,818		—		—		43,345		725,927
Loans to individuals	1,351,274		—		102		—		—		102		1,351,376
Automobile and recreational vehicles	1,275,665		—		100		—		—		100		1,275,765
Consumer credit cards	9,610		—		—		—		—		—		9,610
Consumer other	65,999		—		2		—		—		2		66,001
Total loans and leases	$	8,723,538	$	127,211	$	114,751	$	—	$	—	$	241,962	$	8,965,500

26

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

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

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

	September 30, 2024
	Term Loans												Revolving Loans
	2024		2023		2022		2021		2020		Prior				Total
	(dollars in thousands)
Time and demand	$	106,373	$	122,043	$	127,757	$	85,518	$	55,193	$	78,136	$	566,457	$	1,141,477
Pass	104,939		114,374		122,913		65,957		51,512		62,727		520,518		1,042,940
OAEM	1,434		5,792		3,687		12,182		2,777		6,310		36,953		69,135
Substandard	—		1,877		1,157		7,379		904		9,099		8,986		29,402
Gross charge-offs	—		(11)		(25)		(247)		(658)		(1,550)		(5,670)		(8,161)
Gross recoveries	—		—		1		—		183		195		26		405
Commercial credit cards	—		—		—		—		—		—		12,405		12,405
Pass	—		—		—		—		—		—		12,405		12,405
Gross charge-offs	—		—		—		—		—		—		(183)		(183)
Gross recoveries	—		—		—		—		—		—		5		5

27

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	September 30, 2024
	Term Loans						Revolving Loans
	2024	2023	2022	2021	2020	Prior		Total
	(dollars in thousands)
Equipment finance	178,083	141,087	47,357	—	—	—	—	366,527
Pass	177,770	139,936	45,642	—	—	—	—	363,348
OAEM	313	414	516	—	—	—	—	1,243
Substandard	—	737	1,199	—	—	—	—	1,936
Gross charge-offs	(60)	(806)	(369)	—	—	—	—	(1,235)
Gross recoveries	—	16	56	—	—	—	—	72
Time and demand other	10,226	10,732	4,822	16,685	19,372	44,696	2,593	109,126
Pass	10,226	10,732	4,822	16,685	19,372	44,696	2,589	109,122
OAEM	—	—	—	—	—	—	4	4
Gross charge-offs	—	—	—	—	—	—	(1,651)	(1,651)
Gross recoveries	—	—	—	—	—	5	146	151
Construction other	24,384	176,947	212,015	76,444	5,669	26,215	874	522,548
Pass	24,384	176,947	207,709	74,933	5,669	18,837	823	509,302
OAEM	—	—	—	—	—	—	51	51
Substandard	—	—	4,306	1,511	—	7,378	—	13,195
Gross charge-offs	—	—	—	(35)	—	—	—	(35)
Gross recoveries	—	—	—	—	—	6	—	6
Construction residential	1,102	13,387	1,804	1,427	—	29	478	18,227
Pass	1,102	13,387	1,804	1,427	—	29	478	18,227
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	36,625	140,707	379,382	493,014	303,754	343,477	1,904	1,698,863
Pass	36,625	139,494	378,595	491,873	303,323	340,106	1,831	1,691,847
OAEM	—	—	—	177	—	866	73	1,116
Substandard	—	1,213	787	964	431	2,505	—	5,900
Gross charge-offs	—	(77)	(1)	(21)	(1)	(37)	—	(137)
Gross recoveries	—	—	—	—	—	150	—	150
Residential junior lien/home equity	14,688	55,779	64,171	38,954	2,148	5,920	493,853	675,513
Pass	14,688	55,768	64,019	38,954	2,148	5,718	489,301	670,596
OAEM	—	—	—	—	—	192	146	338
Substandard	—	11	152	—	—	10	4,406	4,579
Gross charge-offs	—	—	(1)	—	—	—	(223)	(224)
Gross recoveries	—	—	—	—	—	32	39	71
Multifamily	11,914	7,053	163,202	160,295	84,929	112,253	781	540,427
Pass	11,914	7,053	150,791	155,172	84,929	111,749	781	522,389
OAEM	—	—	12,411	5,123	—	422	—	17,956
Substandard	—	—	—	—	—	82	—	82
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Non-owner occupied	48,625	201,299	457,064	185,451	153,016	745,884	11,745	1,803,084
Pass	48,625	198,289	454,957	185,208	138,414	712,333	11,680	1,749,506
OAEM	—	—	2,107	243	1,660	9,831	—	13,841
Substandard	—	3,010	—	—	12,942	23,720	65	39,737
Gross charge-offs	—	—	(50)	—	—	(457)	—	(507)
Gross recoveries	—	—	—	—	—	53	—	53

28

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	September 30, 2024
	Term Loans												Revolving Loans
	2024		2023		2022		2021		2020		Prior				Total
	(dollars in thousands)
Owner occupied	55,366		104,679		152,829		150,658		62,568		186,763		13,064		725,927
Pass	54,316		103,705		140,557		144,791		60,920		167,112		11,181		682,582
OAEM	1,050		113		7,086		5,832		202		7,415		1,829		23,527
Substandard	—		861		5,186		35		1,446		12,236		54		19,818
Gross charge-offs	—		—		(141)		(136)		(1,050)		(163)		(50)		(1,540)
Gross recoveries	—		—		—		28		—		44		41		113
Automobile and recreational vehicles	308,474		343,733		353,335		170,238		81,085		18,900		—		1,275,765
Pass	308,474		343,733		353,335		170,184		81,079		18,860		—		1,275,665
Substandard	—		—		—		54		6		40		—		100
Gross charge-offs	(88)		(1,242)		(2,490)		(898)		(454)		(380)		—		(5,552)
Gross recoveries	2		298		669		406		243		319		—		1,937
Consumer credit cards	—		—		—		—		—		—		9,610		9,610
Pass	—		—		—		—		—		—		9,610		9,610
Gross charge-offs	—		—		—		—		—		—		(348)		(348)
Gross recoveries	—		—		—		—		—		—		78		78
Consumer other	6,618		4,948		2,905		10,850		803		2,411		37,466		66,001
Pass	6,618		4,948		2,905		10,850		803		2,411		37,464		65,999
Substandard	—		—		—		—		—		—		2		2
Gross charge-offs	—		(91)		(73)		(57)		(16)		(34)		(977)		(1,248)
Gross recoveries	—		—		14		20		13		93		151		291
Total loans and leases	$	802,478	$	1,322,394	$	1,966,643	$	1,389,534	$	768,537	$	1,564,684	$	1,151,230	$	8,965,500
Total charge-offs	$	(148)	$	(2,227)	$	(3,150)	$	(1,394)	$	(2,179)	$	(2,621)	$	(9,102)	$	(20,821)
Total recoveries	$	2	$	314	$	740	$	454	$	439	$	897	$	486	$	3,332

	December 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Time and demand	$	170,285	$	178,568	$	111,288	$	73,487	$	42,502	$	65,419	$	545,751	$	1,187,300
Pass	166,716		174,699		100,779		71,125		29,812		57,660		497,972		1,098,763
OAEM	1,707		3,129		2,948		1,530		10,873		2,553		35,585		58,325
Substandard	1,862		740		7,561		832		1,817		5,206		12,194		30,212
Gross charge-offs	(582)		(4,572)		(18)		(2,195)		(2,364)		(1,283)		(5,133)		(16,147)
Gross recoveries	—		—		—		119		4		128		9		260
Commercial credit cards	—		—		—		—		—		—		12,906		12,906
Pass	—		—		—		—		—		—		12,906		12,906
Gross charge-offs	—		—		—		—		—		—		(105)		(105)
Gross recoveries	—		—		—		—		—		—		13		13
Equipment finance	170,630		62,314		—		—		—		—		—		232,944
Pass	170,302		61,800		—		—		—		—		—		232,102
Substandard	328		514		—		—		—		—		—		842
Gross charge-offs	(104)		(433)		—		—		—		—		—		(537)
Gross recoveries	—		—		—		—		—		—		—		—
Time and demand other	9,965		6,022		17,860		19,352		3,025		46,466		7,509		110,199
Pass	9,965		6,022		17,860		19,352		3,025		46,466		7,509		110,199
Gross charge-offs	—		—		—		—		—		—		(2,410)		(2,410)
Gross recoveries	—		—		—		—		—		—		225		225

29

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	December 31, 2023
	Term Loans						Revolving Loans
	2023	2022	2021	2020	2019	Prior		Total
	(dollars in thousands)
Construction other	94,150	217,565	154,873	44,428	5,379	24,541	697	541,633
Pass	94,150	214,277	153,195	44,428	5,379	17,315	697	529,441
Substandard	—	3,288	1,678	—	—	7,226	—	12,192
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Construction residential	27,487	19,322	2,284	3,194	3,337	—	478	56,102
Pass	27,487	19,322	2,284	3,194	3,337	—	478	56,102
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Residential first lien	120,053	385,917	527,057	320,107	97,529	286,503	1,941	1,739,107
Pass	119,903	385,269	524,841	319,762	96,702	283,665	1,864	1,732,006
OAEM	—	80	1,527	—	—	731	77	2,415
Substandard	150	568	689	345	827	2,107	—	4,686
Gross charge-offs	—	(98)	—	(31)	(1)	(116)	—	(246)
Gross recoveries	—	—	—	—	—	177	—	177
Residential junior lien/home equity	62,098	70,171	44,359	2,487	2,305	4,949	491,400	677,769
Pass	62,098	70,171	44,359	2,487	2,305	4,672	487,142	673,234
OAEM	—	—	—	—	—	208	145	353
Substandard	—	—	—	—	—	69	4,113	4,182
Gross charge-offs	—	—	—	—	—	—	(315)	(315)
Gross recoveries	—	—	—	—	—	—	70	70
Multifamily	6,839	156,393	155,067	94,284	44,121	92,585	1,853	551,142
Pass	6,839	144,728	155,067	94,284	44,121	92,047	1,853	538,939
OAEM	—	11,665	—	—	—	452	—	12,117
Substandard	—	—	—	—	—	86	—	86
Gross charge-offs	—	—	—	—	—	—	—	—
Gross recoveries	—	—	—	—	—	—	—	—
Non-owner occupied	184,562	423,543	159,593	148,716	221,551	621,678	13,142	1,772,785
Pass	181,578	415,577	159,593	148,716	211,019	592,755	13,077	1,722,315
OAEM	—	7,546	—	—	7,313	16,793	—	31,652
Substandard	2,984	420	—	—	3,219	12,130	65	18,818
Gross charge-offs	—	(232)	—	—	—	(4,473)	—	(4,705)
Gross recoveries	—	—	—	—	—	127	—	127
Owner occupied	106,831	163,830	153,996	80,522	59,357	152,728	11,961	729,225
Pass	106,583	161,071	149,788	75,267	42,745	147,809	11,821	695,084
OAEM	112	785	3,950	4,000	5,363	4,026	33	18,269
Substandard	136	1,974	258	1,255	11,249	893	107	15,872
Gross charge-offs	—	—	(32)	—	—	(1,540)	—	(1,572)
Gross recoveries	—	—	—	—	—	24	—	24
Automobile and recreational vehicles	427,112	459,836	234,144	115,364	35,402	6,111	—	1,277,969
Pass	427,112	459,835	234,085	115,354	35,345	6,074	—	1,277,805
Substandard	—	1	59	10	57	37	—	164
Gross charge-offs	(487)	(2,232)	(1,258)	(972)	(527)	(111)	—	(5,587)
Gross recoveries	71	479	419	367	347	149	—	1,832
Consumer credit cards	—	—	—	—	—	—	10,291	10,291
Pass	—	—	—	—	—	—	10,291	10,291
Gross charge-offs	—	—	—	—	—	—	(290)	(290)
Gross recoveries	—	—	—	—	—	—	87	87

30

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	December 31, 2023
	Term Loans												Revolving Loans
	2023		2022		2021		2020		2019		Prior				Total
	(dollars in thousands)
Consumer other	6,893		4,224		13,277		1,411		1,090		3,440		39,054		69,389
Pass	6,893		4,224		13,277		1,411		1,090		3,440		39,052		69,387
Substandard	—		—		—		—		—		—		2		2
Gross charge-offs	(21)		(50)		(130)		(31)		(157)		(23)		(941)		(1,353)
Gross recoveries	—		1		4		9		35		66		185		300
Total loans and leases	$	1,386,905	$	2,147,705	$	1,573,798	$	903,352	$	515,598	$	1,304,420	$	1,136,983	$	8,968,761
Total charge-offs	$	(1,194)	$	(7,617)	$	(1,438)	$	(3,229)	$	(3,049)	$	(7,546)	$	(9,194)	$	(33,267)
Total recoveries	$	71	$	480	$	423	$	495	$	386	$	671	$	589	$	3,115

Portfolio Risks

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

Total net charge-offs for the nine months ended September 30, 2024 and 2023 were $17.5 million and $13.8 million, respectively.

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of September 30, 2024 and December 31, 2023. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.

31

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	September 30, 2024
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,809	$	3,315	$	—	$	15,409	$	20,533	$	1,609,002	$	1,629,535
Time and demand	891		3,146		—		13,689		17,726		1,123,751		1,141,477
Commercial credit cards	41		53		—		—		94		12,311		12,405
Equipment finance	875		116		—		1,720		2,711		363,816		366,527
Time and demand other	2		—		—		—		2		109,124		109,126
Real estate construction	6,016		—		—		5,817		11,833		528,942		540,775
Construction other	6,016		—		—		5,817		11,833		510,715		522,548
Construction residential	—		—		—		—		—		18,227		18,227
Residential real estate	4,745		2,505		994		10,223		18,467		2,355,909		2,374,376
Residential first lien	3,428		1,753		436		5,644		11,261		1,687,602		1,698,863
Residential junior lien/home equity	1,317		752		558		4,579		7,206		668,307		675,513
Commercial real estate	10,599		479		—		43,172		54,250		3,015,188		3,069,438
Multifamily	69		—		—		21		90		540,337		540,427
Non-owner occupied	6,520		180		—		35,314		42,014		1,761,070		1,803,084
Owner occupied	4,010		299		—		7,837		12,146		713,781		725,927
Loans to individuals	4,416		1,249		197		102		5,964		1,345,412		1,351,376
Automobile and recreational vehicles	4,083		896		79		100		5,158		1,270,607		1,275,765
Consumer credit cards	27		32		—		—		59		9,551		9,610
Consumer other	306		321		118		2		747		65,254		66,001
Total loans and leases	$	27,585	$	7,548	$	1,191	$	74,723	$	111,047	$	8,854,453	$	8,965,500

32

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

	December 31, 2023
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,206	$	745	$	4,187	$	10,060	$	16,198	$	1,527,151	$	1,543,349
Time and demand	565		691		4,187		9,218		14,661		1,172,639		1,187,300
Commercial credit cards	7		54		—		—		61		12,845		12,906
Equipment finance	600		—		—		842		1,442		231,502		232,944
Time and demand other	34		—		—		—		34		110,165		110,199
Real estate construction	—		—		—		3,288		3,288		594,447		597,735
Construction other	—		—		—		3,288		3,288		538,345		541,633
Construction residential	—		—		—		—		—		56,102		56,102
Residential real estate	6,982		1,535		1,062		8,573		18,152		2,398,724		2,416,876
Residential first lien	4,130		940		171		4,443		9,684		1,729,423		1,739,107
Residential junior lien/home equity	2,852		595		891		4,130		8,468		669,301		677,769
Commercial real estate	4,157		—		3,509		17,385		25,051		3,028,101		3,053,152
Multifamily	—		—		—		55		55		551,087		551,142
Non-owner occupied	2,303		—		3,509		14,282		20,094		1,752,691		1,772,785
Owner occupied	1,854		—		—		3,048		4,902		724,323		729,225
Loans to individuals	4,613		878		678		166		6,335		1,351,314		1,357,649
Automobile and recreational vehicles	4,115		612		151		164		5,042		1,272,927		1,277,969
Consumer credit cards	39		71		—		—		110		10,181		10,291
Consumer other	459		195		527		2		1,183		68,206		69,389
Total loans and leases	$	16,958	$	3,158	$	9,436	$	39,472	$	69,024	$	8,899,737	$	8,968,761

Nonaccrual Loans

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

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

Nonperforming Loans

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

33

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of a nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.

At September 30, 2024 and December 31, 2023, there were no nonperforming loans held for sale. During both the nine months ended September 30, 2024 and 2023, there were no gains recognized on the sale of nonperforming loans.

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of September 30, 2024 and December 31, 2023. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position.

34

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	September 30, 2024						December 31, 2023
	Recorded investment		Unpaid principal balance		Related specific allowance		Recorded investment		Unpaid principal balance		Related specific allowance
	(dollars in thousands)
With no related specific allowance recorded:
Commercial, financial, agricultural and other	$	3,631	$	16,697			$	4,369	$	18,014
Time and demand	2,324		15,390				3,527		17,172
Equipment finance	1,307		1,307				842		842
Time and demand other	—		—				—		—
Real estate construction	5,817		5,869				3,288		3,288
Construction other	5,817		5,869				3,288		3,288
Construction residential	—		—				—		—
Residential real estate	8,669		10,357				7,042		8,763
Residential first lien	5,351		6,290				4,161		5,151
Residential junior lien/home equity	3,318		4,067				2,881		3,612
Commercial real estate	9,524		9,951				12,402		18,219
Multifamily	21		21				55		58
Non-owner occupied	7,236		7,419				10,971		17,092
Owner occupied	2,267		2,511				1,376		1,069
Loans to individuals	102		157				166		259
Automobile and recreational vehicles	100		141				164		257
Consumer other	2		16				2		2
Subtotal	27,743		43,031				27,267		48,543
With a specific allowance recorded:
Commercial, financial, agricultural and other	11,778		12,886		$	6,534	5,691		6,787		$	4,044
Time and demand	11,365		12,473		6,397		5,691		6,787		4,044
Equipment finance	413		413		137		—		—		—
Time and demand other	—		—		—		—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—		—		—		—
Construction residential	—		—		—		—		—		—
Residential real estate	1,554		1,723		249		1,531		1,697		118
Residential first lien	293		293		44		282		279		39
Residential junior lien/home equity	1,261		1,430		205		1,249		1,418		79
Commercial real estate	33,648		34,798		7,491		4,983		5,294		387
Multifamily	—		—		—		—		—		—
Non-owner occupied	28,078		29,050		6,686		3,311		3,550		174
Owner occupied	5,570		5,748		805		1,672		1,744		213
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—
Consumer other	—		—		—		—		—		—
Subtotal	46,980		49,407		14,274		12,205		13,778		4,549
Total	$	74,723	$	92,438	$	14,274	$	39,472	$	62,321	$	4,549

35

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,
	2024				2023
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related specific allowance recorded:
Commercial, financial, agricultural and other	$	5,720	$	10	$	3,974	$	141
Time and demand	4,673		10		3,786		141
Equipment finance	1,047		—		188		—
Time and demand other	—		—		—		—
Real estate construction	4,424		—		365		—
Construction other	4,424		—		365		—
Construction residential	—		—		—		—
Residential real estate	8,223		117		6,224		75
Residential first lien	4,946		114		3,602		74
Residential junior lien/home equity	3,277		3		2,622		1
Commercial real estate	8,951		62		9,253		170
Multifamily	38		—		30		—
Non-owner occupied	6,177		20		7,313		57
Owner occupied	2,736		42		1,910		113
Loans to individuals	136		5		428		7
Automobile and recreational vehicles	134		5		341		7
Consumer other	2		—		87		—
Subtotal	27,454		194		20,244		393
With a specific allowance recorded:
Commercial, financial, agricultural and other	5,128		37		10,190		(16)
Time and demand	5,083		37		10,190		(16)
Equipment finance	45		—		—		—
Time and demand other	—		—		—		—
Real estate construction	—		—		—		—
Construction other	—		—		—		—
Construction residential	—		—		—		—
Residential real estate	1,283		—		1,099		—
Residential first lien	33		—		—		—
Residential junior lien/home equity	1,250		—		1,099		—
Commercial real estate	15,034		233		13,134		—
Multifamily	—		—		—		—
Non-owner occupied	12,979		—		12,763		—
Owner occupied	2,055		233		371		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—
Consumer other	—		—		—		—
Subtotal	21,445		270		24,423		(16)
Total	$	48,899	$	464	$	44,667	$	377

36

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,
	2024				2023
	Average recorded investment		Interest income recognized			Average recorded investment		Interest Income Recognized
	(dollars in thousands)
With no related specific allowance recorded:
Commercial, financial, agricultural and other	$	5,252	$	10		$	2,509	$	135
Time and demand	3,770		10			2,269		135
Equipment finance	1,482		—			240		—
Time and demand other	—		—			—		—
Real estate construction	5,834		—			1,096		—
Construction other	5,834		—			1,096		—
Construction residential	—		—			—		—
Residential real estate	8,781		4			6,290		35
Residential first lien	5,420		4			3,784		34
Residential junior lien/home equity	3,361		—			2,506		1
Commercial real estate	10,089		17			7,908		213
Multifamily	14		—			68		—
Non-owner occupied	7,593		17			6,498		53
Owner occupied	2,482		—			1,342		160
Loans to individuals	121		2			401		6
Automobile and recreational vehicles	119		2			315		6
Consumer other	2		—			86		—
Subtotal	30,077		33			18,204		389
With a specific allowance recorded:
Commercial, financial, agricultural and other	7,816		28			14,980		—
Time and demand	7,679		28			14,980		—
Equipment finance	137		—			—		—
Time and demand other	—		—			—		—
Real estate construction	—		—			—		—
Construction other	—		—			—		—
Construction residential	—		—			—		—
Residential real estate	1,351		—			1,236		—
Residential first lien	98		—			—		—
Residential junior lien/home equity	1,253		—			1,236		—
Commercial real estate	24,633		233			13,514		—
Multifamily	—		—			—		—
Non-owner occupied	20,406		—			12,601		—
Owner occupied	4,227		233			913		—
Loans to individuals	—		—			—		—
Automobile and recreational vehicles	—		—			—		—
Consumer other	—		—			—		—
Subtotal	33,800		261			29,730		—
Total	$	63,877	$	294		$	47,934	$	389

Unfunded commitments related to nonperforming loans were $0.2 million and $0.1 million at September 30, 2024 and December 31, 2023, respectively. After consideration of the requirements to draw and available collateral related to these

37

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

commitments, it was determined that no reserve was required for these commitments at September 30, 2024 and December 31, 2023.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

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

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

	For the Nine Months Ended September 30, 2024
	Rate Reduction		Term Extension		Payment Deferral		Term Extension and Payment Deferral		Rate Reduction, Term Extension and Payment Deferral		Rate Reduction and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)
Commercial, financial, agricultural and other	$	254	$	5,995	$	—	$	898	$	—	$	100	$	7,247	0.44	%
Time and demand	254		5,995		—		834		—		—		7,083		0.62
Equipment finance	—		—		—		64		—		100		164		0.04
Residential real estate	—		160		—		509		—		—		669		0.03
Residential first lien	—		160		—		482		—		—		642		0.04
Residential junior lien/home equity	—		—		—		27		—		—		27		—
Commercial real estate	—		—		9,674		—		—		—		9,674		0.32
Owner occupied	—		—		9,674		—		—		—		9,674		1.33
Loans to individuals	—		11		—		9		12		—		32		—
Automobile and recreational vehicles	—		11		—		9		12		—		32		—
Total	$	254	$	6,166	$	9,674	$	1,416	$	12	$	100	$	17,622	0.20	%

	For the Nine Months Ended September 30, 2023
	Rate Reduction		Term Extension		Principal Forgiveness		Term Extension and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)
Residential real estate	$	22	$	305	$	—	$	305	$	632	0.03	%
Residential first lien	22		305		—		305		632		0.04
Total	$	22	$	305	$	—	$	305	$	632	0.01	%

38

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, 2024
	Rate Reduction		Term Extension		Payment Deferral		Term Extension and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)
Commercial, financial, agricultural and other	$	75	$	4,885	$	—	$	834	$	5,794	0.36	%
Time and demand	75		4,885		—		834		5,794		0.51
Residential real estate	—		72		—		124		196		0.01
Residential first lien	—		72		—		124		196		0.01
Total	$	75	$	4,957	$	—	$	958	$	5,990	0.07	%

	For the Three Months Ended September 30, 2023
	Rate Reduction		Term Extension		Principal Forgiveness		Term Extension and Payment Deferral		Total		Percentage of Total Loans and Leases
	(dollars in thousands)
Residential real estate	$	—	$	144	$	—	$	63	$	207	0.01	%
Residential first lien	—		144		—		63		207		0.01
Total loans and leases	$	—	$	144	$	—	$	63	$	207	—	%

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

	For the Nine Months Ended September 30, 2024
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)
Commercial, financial, agricultural and other	1.99	%	1.5	$	—	0.9
Time and demand	1.87		1.5	—		1.0
Equipment finance	2.30		0.5	—		0.4
Residential real estate	—		3.8	—		0.7
Residential first lien	—		3.5	—		0.7
Residential junior lien/home equity	—		10.3	—		0.3
Commercial real estate	—		0.0	—		0.9
Owner occupied	—		0.5	—		0.9
Loans to individuals	2.39		2.6	—		0.4
Automobile and recreational vehicles	2.39		2.6	—		0.4
Total	2.01	%	1.7	$	—	0.9

	For the Nine Months Ended September 30, 2023
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)
Residential real estate	2.25	%	2.8	$	—	0.5
Residential first lien	2.25		2.8	—		0.5
Total	2.25	%	2.8	$	—	0.5

39

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, 2024
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)
Commercial, financial, agricultural and other	2.75	%	1.4	$	—	1.0
Time and demand	2.75		1.4	—		1.0
Residential real estate	—		2.9	—		0.7
Residential first lien	—		2.9	—		0.7
Total	2.75	%	1.5	$	—	1.0

	For the Three Months Ended September 30, 2023
	Rate Reduction		Term Extension (Years)	Principal Forgiveness		Payment Deferral (Years)
	(dollars in thousands)
Residential real estate	—	%	2.2	—		0.5
Residential first lien	—		2.2	—		0.5
Total	—	%	2.2	$	—	0.5

40

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A modification is considered to be in default when the loan is 90 days or more past due. The following table shows modifications considered to be in default.

	September 30, 2024			December 31, 2023
	Number of Contracts	Balance		Number of Contracts	Balance
	(dollars in thousands)
Commercial, financial, agricultural and other	2	$	164	—	$	—
Equipment finance	2	164		—	—
Residential real estate	1	95		—	—
Residential first lien	1	95		—	—
Total loans and leases	3	$	259	—	$	—

The following table shows the payment status of loans that have been modified in the last twelve months prior to the date presented:

	September 30, 2024
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	7,129	$	—	$	—	$	164	$	7,293
Time and demand	7,129		—		—		—		7,129
Equipment finance	—		—		—		164		164
Residential real estate	616		—		84		95		795
Residential first lien	589		—		84		95		768
Residential junior lien/home equity	27		—		—		—		27
Commercial real estate	9,674		—		—		—		9,674
Owner occupied	9,674		—		—		—		9,674
Loans to individuals	32		—		—		—		32
Automobile and recreational vehicles	32		—		—		—		32
Total loans and leases	$	17,451	$	—	$	84	$	259	$	17,794

	December 31, 2023
	Current		30 - 59 days past due		60 - 89 days past due		90 days or greater		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	50	$	—	$	—	$	—	$	50
Time and demand	50		—		—		—		50
Residential real estate	758		—		—		—		758
Residential first lien	758		—		—		—		758
Commercial real estate	9,663		—		—		—		9,663
Owner occupied	9,663		—		—		—		9,663
Total loans and leases	$	10,471	$	—	$	—	$	—	$	10,471

41

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, 2024
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	27,996	$	(11,230)	$	633	$	13,304	$	30,703
Time and demand	22,819		(8,161)		405		7,483		22,546
Commercial credit cards	278		(183)		5		137		237
Equipment finance	3,399		(1,235)		72		4,294		6,530
Time and demand other	1,500		(1,651)		151		1,390		1,390
Real estate construction	7,418		(35)		6		(1,209)		6,180
Construction other	6,448		(35)		6		(527)		5,892
Construction residential	970		—		—		(682)		288
Residential real estate	23,901		(361)		221		(1,122)		22,639
Residential first lien	16,975		(137)		150		(985)		16,003
Residential junior lien/home equity	6,926		(224)		71		(137)		6,636
Commercial real estate	37,071		(2,047)		166		9,492		44,682
Multifamily	5,233		—		—		(178)		5,055
Non-owner occupied	19,995		(507)		53		8,405		27,946
Owner occupied	11,843		(1,540)		113		1,265		11,681
Loans to individuals	21,332		(7,148)		2,306		5,418		21,908
Automobile and recreational vehicles	19,142		(5,552)		1,937		4,065		19,592
Consumer credit cards	372		(348)		78		238		340
Consumer other	1,818		(1,248)		291		1,115		1,976
Total loans and leases	$	117,718	$	(20,821)	$	3,332	$	25,883	$	126,112

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

42

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

43

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, 2024
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	30,608	$	(5,980)	$	110	$	5,965	$	30,703
Time and demand	23,589		(4,784)		11		3,730		22,546
Commercial credit cards	244		(81)		5		69		237
Equipment finance	5,292		(521)		36		1,723		6,530
Time and demand other	1,483		(594)		58		443		1,390
Real estate construction	6,389		—		—		(209)		6,180
Construction other	6,017		—		—		(125)		5,892
Construction residential	372		—		—		(84)		288
Residential real estate	22,173		(106)		51		521		22,639
Residential first lien	15,745		(28)		37		249		16,003
Residential junior lien/home equity	6,428		(78)		14		272		6,636
Commercial real estate	42,544		(1,423)		42		3,519		44,682
Multifamily	5,206		—		—		(151)		5,055
Non-owner occupied	25,036		(37)		5		2,942		27,946
Owner occupied	12,302		(1,386)		37		728		11,681
Loans to individuals	21,940		(2,280)		801		1,447		21,908
Automobile and recreational vehicles	19,676		(1,827)		676		1,067		19,592
Consumer credit cards	346		(120)		33		81		340
Consumer other	1,918		(333)		92		299		1,976
Total loans and leases	$	123,654	$	(9,789)	$	1,004	$	11,243	$	126,112

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

44

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	For the Three Months Ended September 30, 2023
	Beginning balance		Allowance for credit loss on PCD acquired loans		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	41,714	$	—	$	(1,762)	$	98	$	(2,645)	$	37,405
Time and demand	37,873		—		(954)		46		(3,914)		33,051
Commercial credit cards	320		—		(28)		6		9		307
Equipment finance	2,074		—		—		—		553		2,627
Time and demand other	1,447		—		(780)		46		707		1,420
Real estate construction	7,728		—		—		—		776		8,504
Construction other	6,145		—		—		—		1,207		7,352
Construction residential	1,583		—		—		—		(431)		1,152
Residential real estate	23,740		—		(304)		57		447		23,940
Residential first lien	16,563		—		(107)		22		553		17,031
Residential junior lien/home equity	7,177		—		(197)		35		(106)		6,909
Commercial real estate	38,927		—		(172)		6		4,338		43,099
Multifamily	5,775		—		—		—		46		5,821
Non-owner occupied	21,710		—		(172)		2		3,952		25,492
Owner occupied	11,442		—		—		4		340		11,786
Loans to individuals	21,437		—		(2,360)		461		1,851		21,389
Automobile and recreational vehicles	19,258		—		(1,883)		412		1,503		19,290
Consumer credit cards	375		—		(59)		16		38		370
Consumer other	1,804		—		(418)		33		310		1,729
Total loans and leases	$	133,546	$	—	$	(4,598)	$	622	$	4,767	$	134,337

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

Note 9 Leases

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

45

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, 2024			December 31, 2023
Balance sheet:
Operating lease asset classified as premises and equipment					$	40,982		$	45,005
Operating lease liability classified as other liabilities					45,472			49,327
	For the Three Months Ended				For the Nine Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024			September 30, 2023
Income statement:
Operating lease cost classified as occupancy and equipment expense	$	1,406	$	1,521	$	4,333		$	4,565
Weighted average lease term, in years					13.12			13.37
Weighted average discount rate					3.72		%	3.51		%
Operating cash flows					$	1,404		$	1,571

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, 2024 were as follows (dollars in thousands):

For the twelve months ended:
September 30, 2025	$	5,577
September 30, 2026	5,063
September 30, 2027	4,749
September 30, 2028	4,415
September 30, 2029	4,456
Thereafter	34,237
Total future minimum lease payments	58,497
Less remaining imputed interest	13,025
Operating lease liability	$	45,472

Note 10 Income Taxes

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at September 30, 2024 and December 31, 2023, First Commonwealth had no material unrecognized tax benefits or accrued interest and penalties. If applicable, First Commonwealth will record interest and penalties as a component of noninterest expense.

First Commonwealth is subject to routine audits of our tax returns by the Internal Revenue Service (“IRS”) as well as all states in which we conduct business. Generally, tax years prior to the year ended December 31, 2020 are no longer open to examination by federal and state taxing authorities.

46

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11 Fair Values of Assets and Liabilities

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

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

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

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

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

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

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

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

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

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

47

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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

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

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

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

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

	Fair Value (dollars in thousands)		Valuation Technique	Unobservable Inputs	Range / (weighted average)
September 30, 2024
Other Investments	$	5,732	Carrying Value	N/A	N/A
Limited Partnership Investments	29,757		Par Value	N/A	N/A
December 31, 2023
Other Investments	$	6,182	Carrying Value	N/A	N/A
Limited Partnership Investments	27,137		Par Value	N/A	N/A

48

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	September 30, 2024
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,116	$	—	$	3,116
Mortgage-Backed Securities - Commercial	—		684,834		—		684,834
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		383,455		—		383,455
Other Government-Sponsored Enterprises	—		947		—		947
Obligations of States and Political Subdivisions	—		8,179		—		8,179
Corporate Securities	—		60,269		—		60,269
Total Debt Securities	—		1,140,800		—		1,140,800
Equity Securities	—		—		—		—
Total Securities Available for Sale	—		1,140,800		—		1,140,800
Other Investments	—		18,860		5,732		24,592
Loans Held for Sale	—		46,785		—		46,785
Other Assets(a)	—		17,815		29,757		47,572
Total Assets	$	—	$	1,224,260	$	35,489	$	1,259,749
Other Liabilities(a)	$	—	$	30,860	$	—	$	30,860
Total Liabilities	$	—	$	30,860	$	—	$	30,860

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

	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	3,465	$	—	$	3,465
Mortgage-Backed Securities - Commercial	—		465,393		—		465,393
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		494,599		—		494,599
Other Government-Sponsored Enterprises	—		915		—		915
Obligations of States and Political Subdivisions	—		8,202		—		8,202
Corporate Securities	—		48,412		—		48,412
Total Securities Available for Sale	—		1,020,986		—		1,020,986
Other Investments	—		44,689		6,182		50,871
Loans Held for Sale	—		29,820		—		29,820
Other Assets(a)	—		32,668		27,137		59,805
Total Assets	$	—	$	1,128,163	$	33,319	$	1,161,482
Other Liabilities(a)	$	—	$	58,167	$	—	$	58,167
Total Liabilities	$	—	$	58,167	$	—	$	58,167

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

49

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, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	2024
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	6,182	$	27,137	$	33,319
Total gains or losses
Included in earnings	—		(7)		(7)
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		3,383		3,383
Issuances	—		—		—
Sales	(450)		—		(450)
Settlements	—		(756)		(756)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	5,732	$	29,757	$	35,489

 

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

During the nine months ended September 30, 2024 and 2023, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2024 and 2023.

50

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, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	2024
	Other Investments		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	6,182	$	28,825	$	35,007
Total gains or losses
Included in earnings	—		4		4
Included in other comprehensive income	—		—		—
Purchases, issuances, sales and settlements
Purchases	—		1,147		1,147
Issuances	—		—		—
Sales	(450)		—		(450)
Settlements	—		(219)		(219)
Transfers from Level 3	—		—		—
Transfers into Level 3	—		—		—
Balance, end of period	$	5,732	$	29,757	$	35,489

 

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

During the three months ended September 30, 2024 and 2023, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2024 and 2023.

51

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	September 30, 2024
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Nonperforming loans	$	—	$	49,501	$	10,948	$	60,449
Other real estate owned	—		1,018		—		1,018
Total Assets	$	—	$	50,519	$	10,948	$	61,467

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

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(dollars in thousands)
Nonperforming loans	$	(6,914)	$	(4,598)	$	(12,413)	$	(5,265)
Other real estate owned	(34)		—		(68)		—
Total losses	$	(6,948)	$	(4,598)	$	(12,481)	$	(5,265)

Nonperforming loans over $250 thousand are individually reviewed to determine the amount of each loan considered to be at risk of non-collection. The fair value for nonperforming loans that are collateral-based is determined by reviewing real property appraisals, equipment valuations, accounts receivable listings and other financial information. A discounted cash flow analysis is performed to determine fair value for nonperforming loans when an observable market price or a current appraisal is not available. For real estate secured loans, First Commonwealth’s loan policy requires updated appraisals be obtained at least every twelve months on all nonperforming loans with balances of $250 thousand and over. For real estate secured loans with balances under $250 thousand, we rely on broker price opinions. For non-real estate secured assets, the Company normally relies on third party valuations specific to the collateral type.

The fair value for other real estate owned that is determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement, is classified as Level 2. The fair value for other real estate owned that is determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of $0.7 million as of September 30, 2024 and primarily consists of residential real estate properties in Pennsylvania and Ohio. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment, we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.

Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 13, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2024.

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

52

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recurring or nonrecurring basis are as discussed above. The methodologies for other financial assets and financial liabilities are discussed below.

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

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

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

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

Off-balance sheet instruments: Many of First Commonwealth’s off-balance sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. FASB ASC Topic 460, “Guarantees” clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The carrying amount and estimated fair value for standby letters of credit was $0.2 million and $0.1 million at September 30, 2024 and December 31, 2023. See Note 6, “Commitments and Contingent Liabilities,” for additional information.

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

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

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

53

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	September 30, 2024
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	126,598	$	126,598	$	126,598	$	—	$	—
Interest-bearing deposits	455,711		455,711		455,711		—		—
Securities available for sale	1,140,800		1,140,800		—		1,140,800		—
Equity securities	—		—		—		—		—
Securities held to maturity	430,425		373,160		—		373,160		—
Other investments	24,592		24,592		—		18,860		5,732
Loans held for sale	46,785		46,785		—		46,785		—
Loans and leases	8,965,500		8,903,333		—		49,501		8,853,832
Financial liabilities
Deposits	9,745,552		9,745,094		—		9,745,094		—
Short-term borrowings	538,828		537,568		—		537,568		—
Subordinated debt	128,266		111,785		—		—		111,785
Long-term debt	3,548		3,539		—		3,539		—
Capital lease obligation	4,471		4,471		—		4,471		—

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

54

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 Derivatives

Derivatives Not Designated as Hedging Instruments

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

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

We have 27 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. We have 21 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are the lead bank. The risk participation agreement provides credit protection to us should the borrower fail to perform on its interest rate derivative contract with us.

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

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

The Company also enters into interest rate lock commitments in conjunction with its mortgage origination business. These are commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Company locks in the rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Loans under mandatory rate lock commitments are covered under forward sales contracts of mortgage-backed securities (“MBS”). Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in "Noninterest income" in the unaudited Consolidated Statements of Income. The impact to noninterest income for the three and nine months ended September 30, 2024 was an increase of $0.6 million and $0.9 million, respectively.

Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. We determine the fair value of rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates and takes into consideration the probability that the rate lock commitments will close or will be funded. At September 30, 2024, the underlying funded mortgage loan commitments had a carrying value of $9.5 million and a fair value of $11.4 million, while the underlying unfunded mortgage loan commitments had a notional amount of $64.0 million. At December 31, 2023, the underlying funded mortgage loan commitments had a carrying value of $7.1 million and a fair value of $8.1 million, while the underlying unfunded mortgage loan commitments had a notional amount of $38.2 million. The interest rate lock commitments decreased other noninterest income by $0.1 million for the three months ended September 30, 2024 and increased other noninterest income by $0.3 million for the nine months ended September 30, 2024, respectively.

55

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Derivatives Designated as Hedging Instruments

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

During 2021, the Company entered into eight interest rate swap contracts that were designated as cash flow hedges, $25.0 million of which matured during the second quarter of 2024. The remaining interest rate swaps have a total notional amount of $475.0 million: $50.0 million with an original maturity of three years, $250.0 million with an original maturity of four years and $175.0 million with an original maturity of five years. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments on commercial loans. Initially these swaps were benchmarked to the 1-month LIBOR rate however, as a result of the discontinuance of the LIBOR rate on June 30, 2023, these swaps were amended to hedge exposure to the variability of the 1-month Daily Simple SOFR rate compounded in arrears. Therefore, the interest rate swaps convert the interest payments on the first $500.0 million of 1-month Daily Simple SOFR based commercial loans into fixed rate payments. The following table provides the notional amount of interest rate swap contracts and their maturity date.

Notional Amount	Maturity Date
(dollars in thousands)
50,000	12/01/24
150,000	05/01/25
25,000	08/25/25
25,000	10/10/25
50,000	11/05/25
150,000	05/01/26
25,000	10/15/26
$475,000

The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income. For the three and nine months ended September 30, 2024, there was a negative impact of $5.1 million and $15.8 million, respectively, on net interest income as a result of these interest rate swaps. Changes in the fair value of the cash flow hedges are reported on the balance sheet and in 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, 2024, and changes in the fair value attributed to hedge ineffectiveness were not material.

56

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	September 30, 2024		December 31, 2023
	(dollars in thousands)
Derivatives not Designated as Hedging Instruments
Interest rate derivatives:
Credit value adjustment	$	(154)	$	(13)
Notional amount:
Interest rate derivatives	921,088		945,046
Interest rate caps	37,295		37,647
Interest rate collars	524		35,878
Risk participation agreements	182,869		206,325
Sold credit protection on risk participation agreements	(151,714)		(121,265)
Interest rate options	64,016		38,155
Interest rate forwards:
Fair value adjustment	(24)		(352)
Notional amount	48,000		39,000
Derivatives Designated as Hedging Instruments
Interest rate swaps:
Fair value adjustment	(12,867)		(25,133)
Notional amount	515,000		570,000

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(dollars in thousands)
Non-hedging interest rate derivatives
Increase (decrease) in other income	$	425	$	(581)	$	721	$	(178)
Non-hedging interest rate forwards
(Decrease) increase in other income	(79)		(460)		329		(590)
Hedging interest rate derivatives
Decrease in interest and fees on loans	(5,630)		(5,508)		(17,832)		(15,678)
Decrease in interest from subordinated debentures	(567)		(715)		(2,014)		(1,925)

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

Note 13 Goodwill

FASB ASC Topic 350-20, “Intangibles – Goodwill and Other” requires an annual valuation of the fair value of a reporting unit that has goodwill and a comparison of the fair value to the book value of equity to determine whether the goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.

We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill at both September 30, 2024 and December 31, 2023 was $363.7 million. No impairment charges on goodwill or other intangible assets were incurred in 2024 or 2023.

57

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2024, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

Note 14 Subordinated Debentures

Subordinated debentures outstanding are as follows:

			September 30, 2024		December 31, 2023
	Due	Rate	Amount			Amount
			(dollars in thousands)
Owed to:
First Commonwealth Bank	2028	3-Month CME Term SOFR + 0.26161% + 1.845%	$	—		$	49,592
First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month CME Term SOFR + 0.26161% + 2.37%	49,393			49,341
First Commonwealth Financial Corp	2031	4.50% until March 29, 2026, then Prime + 1.00%	6,706			6,641
First Commonwealth Capital Trust II	2034	3-Month CME Term SOFR + 0.26161% + 2.85%	30,929			30,929
First Commonwealth Capital Trust III	2034	3-Month CME Term SOFR + 0.26161% + 2.85%	41,238			41,238
Total			$	128,266		$	177,741

With the acquisition of Centric in January 2023, First Commonwealth acquired a ten-year subordinated note with a principal balance of $6.0 million. The rate remains fixed at 4.50% until March 29, 2026, then adjusts quarterly to Prime + 1.00%. The Bank may redeem the notes, beginning with the interest payment due on March 29, 2026, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. A fair value premium of $0.6 million was recognized in connection with the acquisition.

On May 21, 2018, First Commonwealth issued ten-year subordinated notes with an aggregate principal amount of $50.0 million. Interest was paid quarterly at a rate of three-month CME Term SOFR + 0.26161% + 1.845%. On June, 1, 2024, the Bank redeemed the notes, in whole, 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. As part of the redemption of these notes, the remaining deferred issuance costs of $0.4 million were recognized as a loss on redemption.

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

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

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

Interest on the debentures issued to First Commonwealth Capital Trust III is paid quarterly at a floating rate of three-month CME Term SOFR + 0.26161% + 2.85%, which is reset quarterly. Subject to regulatory approval, First Commonwealth may

58

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

In order to reduce its exposure to variability in expected future cash flows related to interest payments on First Commonwealth Capital Trust II and III, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts fix the index rate based portion of the interest rate on Capital Trust III at 1.525% until August 15, 2026. A similar interest rate swap contract was entered for Capital Trust II which fixed the index rate based portion at 1.515%, however that swap expired on August 15, 2024. 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.

59

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Insurance and Retail Brokerage Commissions

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

Retail brokerage income primarily consists of commissions received on annuity and investment product sales through a third-party service provider. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy or the execution of an investment transaction. The Company does not earn a significant amount of trailer fees on annuity sales. However, after considering the factors impacting these trailer fees, such as the uncertainty of investor behavior and changes in the market value of assets, First Commonwealth determined that it would recognize trailing fees as received because it could not reasonably estimate an amount of future trailing commissions for which collection is probable. Commissions from the third-party service provider are received on a monthly basis based upon customer activity for the month. The fees are recognized monthly with a receivable until commissions are received from the third-party service provider the following month. Because the Company acts as an agent in arranging the relationship between the customer and the third-party service provider and does not control the services rendered to the customers, retail brokerage fees are presented net of related costs, including $3.9 million and $3.1 million in commission expense as of September 30, 2024 and 2023, respectively.

Card-Related Interchange Income

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

Other Income

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

Gains(losses) on sales of OREO

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

60

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income	$	3,242	$	2,949	$	8,790	$	7,967
Service charges on deposit accounts	5,840		5,600		16,769		15,842
Insurance and retail brokerage commissions	2,663		2,305		7,618		7,171
Card-related interchange income	4,137		7,221		17,964		21,422
Gain on sale of other loans and assets	290		102		567		268
Other income	1,121		1,097		3,433		3,233
Noninterest Income (in-scope of Topic 606)	17,293		19,274		55,141		55,903
Noninterest Income (out-of-scope of Topic 606)	7,405		5,552		18,755		16,409
Total Noninterest Income	$	24,698	$	24,826	$	73,896	$	72,312

61

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, 2024 and 2023, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

Forward-Looking Statements

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

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

•Volatility and disruption in national and international financial markets.

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

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

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

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

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

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

•The soundness of other financial institutions.

•Political instability.

•Impairment of our goodwill or other intangible assets.

•Acts of God or of war or terrorism.

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

•Changes in consumer spending, borrowings and savings habits.

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

•Technological changes.

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

•Acquisitions and integration of acquired businesses.

•Our ability to increase market share and control expenses.

•Our ability to attract and retain qualified employees.

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

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

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

•Changes in our liquidity position.

62

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

•Changes in our organization, compensation and benefit plans.

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

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

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

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

Explanation of Use of Non-GAAP Financial Measures

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

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 66 and 74 for nine and three months ended September 30, 2024 and 2023.

63

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,
	2024			2023			2024			2023
	(dollars in thousands, except per share data)
Net Income	$	32,086		$	39,231		$	106,723		$	112,236
Per Share Data:
Basic Earnings per Share	$	0.31		$	0.38		$	1.05		$	1.11
Diluted Earnings per Share	0.31			0.38			1.04			1.10
Cash Dividends Declared per Common Share	0.130			0.125			0.385			0.370
Average Balance:
Total assets	$	11,776,532		$	11,307,058		$	11,664,788		$	10,987,290
Total equity	1,389,290			1,249,441			1,353,125			1,215,433
End of Period Balance:
Net loans and leases (1)							$	8,886,173		$	8,800,515
Total assets							11,983,199			11,421,988
Total deposits							9,745,552			9,241,065
Total equity							1,409,616			1,240,531
Key Ratios:
Return on average assets	1.08		%	1.38		%	1.22		%	1.37		%
Return on average equity	9.19		%	12.46		%	10.54		%	12.35		%
Dividends payout ratio	41.94		%	32.89		%	36.67		%	33.33		%
Average equity to average assets ratio	11.80		%	11.05		%	11.60		%	11.06		%
Net interest margin	3.56		%	3.76		%	3.55		%	3.87		%
Net loans to deposits ratio							91.18		%	95.23		%

(1) Includes loans held for sale.

Results of Operations

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Net Income

For the nine months ended September 30, 2024, First Commonwealth had net income of $106.7 million, or $1.04 diluted earnings per share, compared to net income of $112.2 million, or $1.10 diluted earnings per share, in the nine months ended September 30, 2023. The decrease in net income was primarily the result of a $6.1 million decrease in net interest income and a $6.0 million increase in the provision for credit losses. Offsetting these items was a $1.6 million increase in noninterest income and a $3.3 million decrease in noninterest expense, the latter of which was primarily due to $8.9 million in expenses related to the Centric acquisition recognized in the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, the Company’s return on average equity was 10.54% and its return on average assets was 1.22%, compared to 12.35% and 1.37%, respectively, for the nine months ended September 30, 2023.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $284.8 million in the first nine months of 2024, compared to $290.9 million for the same period in 2023. The decrease in net interest income can be attributed to a 100 basis point increase in the cost of interest-bearing liabilities offset by a 49 basis point increase in the yield on interest-earning assets. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 79.3% and 80.0% for the nine months ended September 30, 2024 and 2023, respectively.

64

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The net interest margin on a fully taxable equivalent basis was 3.55% for the nine months ended September 30, 2024 and 3.87% for the nine months ended September 30, 2023. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The taxable equivalent yield on interest-earning assets was 5.63% for the nine months ended September 30, 2024, an increase of 49 basis points compared to the 5.14% yield for the same period in 2023. This change is a result of the higher interest rate environment and resulted in the loan portfolio yield increasing by 47 basis points when compared to the nine months ended September 30, 2023. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased 30 basis points due to the impact on loan repricing and new volumes at higher interest rates. Additionally, for the nine months ended September 30, 2024, 8 basis points of the yield on interest-earning assets can be attributed to the recognition of $6.1 million in accretion of purchase accounting marks, primarily from the Centric acquisition. For the nine months ended September 30, 2023, accretion of purchase accounting marks contributed $6.9 million, or 9 basis points, to the yield on interest-earning assets.

The investment portfolio yield increased 101 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance for the period ended September 30, 2024 increased $278.9 million as compared to the nine months ended September 30, 2023 as a result of liquidity from growth in interest-bearing liabilities. The yield on interest-bearing deposits with banks increased 20 basis points for the nine months ended September 30, 2024 as compared to the prior year, while the average balance increased from $197.5 million in 2023 to $199.9 million in 2024.

The cost of interest-bearing liabilities increased to 2.84% for the nine months ended September 30, 2024, from 1.84% for the same period in 2023. The cost of interest-bearing deposits increased 109 basis points and short-term borrowings decreased 11 basis points in comparison to the same period last year. The increase in the cost of interest-bearing deposits can be attributed to higher market interest rates, as well as changes in the mix of deposits as customers moved funds to take advantage of the increased rates offered in money market and time deposit accounts. Comparing the nine months ended September 30, 2024 with the comparable period in 2023, average time deposits increased $599.2 million, or 67.3%, with an increase in the cost of these deposits of 130 basis points. Other interest-bearing deposits increased on average $116.7 million, or 2.1%, compared to the nine months ended September 30, 2023 and the cost of these deposits increased 88 basis points. Compared to the prior period, short-term borrowings increased an average of $158.0 million in order to provide liquidity and fund growth in loans and investments.

For the nine months ended September 30, 2024, changes in rates negatively impacted net interest income by $7.0 million when compared with the same period in 2023. The higher yield on interest-earning assets positively impacted net interest income by $44.3 million, while the increase in the cost of interest-bearing liabilities negatively impacted net interest income by $51.3 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $0.9 million for the nine months ended September 30, 2024, as compared to the same period in 2023. Higher levels of interest-earning assets resulted in an increase of $20.4 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $19.5 million. Average interest-earning assets for the nine months ended September 30, 2024 increased $661.0 million, or 6.6%, compared to the same period in 2023. Average loans for the comparable period increased $379.7 million, or 4.4% and average investments increased $278.9 million, or 22.7%.

Net interest income was negatively impacted by a $190.8 million decrease in average net free funds for the nine months ended September 30, 2024 as compared to September 30, 2023. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The level of net free funds was impacted by a lower level of noninterest-bearing demand deposits as customers became more rate sensitive and moved their funds into interest-bearing deposits. Average noninterest-bearing demand deposits for the nine months ended September 30, 2024 decreased $292.7 million, or 11.3%, compared to the same period in 2023.

65

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 nine months ended September 30:

 

	2024		2023
	(dollars in thousands)
Interest income per Consolidated Statements of Income	$	450,467	$	385,741
Adjustment to fully taxable equivalent basis	994		923
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	451,461		386,664
Interest expense	166,656		95,802
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	284,805	$	290,862

66

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

 

	2024						2023
	Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
	(dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	199,887	$	8,304	5.55	%	$	197,522	$	7,899	5.35	%
Tax-free investment securities	20,218		405		2.68		21,660		437		2.70
Taxable investment securities	1,488,386		35,854		3.22		1,208,061		19,762		2.19
Loans and leases, net of unearned income (b)(c)	9,006,908		406,898		6.03		8,627,203		358,566		5.56
Total interest-earning assets	10,715,399		451,461		5.63		10,054,446		386,664		5.14
Noninterest-earning assets:
Cash	113,798						111,732
Allowance for credit losses	(121,331)						(131,297)
Other assets	956,922						952,409
Total noninterest-earning assets	949,389						932,844
Total Assets	$	11,664,788					$	10,987,290
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	1,909,166	$	25,902	1.81	%	$	1,970,178	$	17,977	1.22	%
Savings deposits (d)	3,704,820		66,256		2.39		3,527,158		35,923		1.36
Time deposits	1,489,476		48,229		4.33		890,299		20,204		3.03
Short-term borrowings	560,743		19,383		4.62		402,782		14,237		4.73
Long-term debt	164,553		6,886		5.59		186,629		7,461		5.35
Total interest-bearing liabilities	7,828,758		166,656		2.84		6,977,046		95,802		1.84
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	2,299,650						2,592,373
Other liabilities	183,255						202,438
Shareholders’ equity	1,353,125						1,215,433
Total Noninterest-Bearing Funding Sources	3,836,030						4,010,244
Total Liabilities and Shareholders’ Equity	$	11,664,788					$	10,987,290
Net Interest Income and Net Yield on Interest-Earning Assets			$	284,805	3.55	%			$	290,862	3.87	%

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the nine months ended September 30, 2024 and 2023.

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

(c)Loan income includes loan fees earned.

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

67

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table shows the effect of changes in volumes and rates on interest income and interest expense for the nine months ended September 30, 2024 compared with September 30, 2023:

 

	Analysis of Year-to-Year Changes in Net Interest Income
	Total Change		Change Due To Volume		Change Due To Rate (a)
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	405	$	95	$	310
Tax-free investment securities	(32)		(29)		(3)
Taxable investment securities	16,092		4,592		11,500
Loans and leases	48,332		15,790		32,542
Total interest income (b)	64,797		20,448		44,349
Interest-bearing liabilities:
Interest-bearing demand deposits	7,925		(557)		8,482
Savings deposits	30,333		1,807		28,526
Time deposits	28,025		13,579		14,446
Short-term borrowings	5,146		5,588		(442)
Long-term debt	(575)		(883)		308
Total interest expense	70,854		19,534		51,320
Net interest income	$	(6,057)	$	914	$	(6,971)

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

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

Provision for Credit Losses

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

68

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

	2024				2023
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	13,304	51	%	$	606	8	%
Time and demand	7,483		29		(2,632)		(36)
Commercial credit cards	137		1		22		—
Equipment finance	4,294		16		1,586		22
Time and demand other	1,390		5		1,630		22
Real estate construction	(1,209)		(5)		(2,243)		(30)
Construction other	(527)		(2)		(381)		(5)
Construction residential	(682)		(3)		(1,862)		(25)
Residential real estate	(1,122)		(4)		1,643		22
Residential first lien	(985)		(3)		1,634		22
Residential junior lien/home equity	(137)		(1)		9		—
Commercial real estate	9,492		37		3,960		54
Multifamily	(178)		(1)		347		5
Non-owner occupied	8,405		33		4,262		58
Owner occupied	1,265		5		(649)		(9)
Loans to individuals	5,418		21		3,421		46
Automobile and recreational vehicles	4,065		16		2,819		38
Consumer credit cards	238		1		100		1
Consumer other	1,115		4		502		7
Provision for credit losses on loans and leases	$	25,883	100	%	$	7,387	100	%
Provision for credit losses - acquisition day 1 non-PCD	—				10,653
Total provision for credit losses on loans and leases	25,883				18,040
Provision for off-balance sheet credit exposure	(3,203)				(1,362)
Total provision for credit losses	$	22,680			$	16,678

Total provision expense for the nine months ended September 30, 2024, increased $6.0 million compared to the nine months ended September 30, 2023. The increase can be attributed to $17.5 million in net charge-offs as well as an increase of $9.2 million in specific reserves. The specific reserves can be attributed to $6.2 million for three non-owner occupied relationships and $2.8 million for a time and demand relationship, all of which were moved to nonaccrual during the nine months ended September 30, 2024. During the first nine months of 2023, provision expense of $10.7 million was recognized as the day 1 non-PCD provision expense resulting from the Centric acquisition. A $1.8 million decrease in the provision for off-balance sheet commitments was recognized for the nine months ended September 30, 2024 as a result of lower off-balance sheet commitments related to construction and time and demand loans.

The allowance for credit losses was $126.1 million, or 1.41%, of total loans and leases outstanding at September 30, 2024, compared to $117.7 million, or 1.31%, at December 31, 2023 and $134.3 million, or 1.51%, at September 30, 2023. Nonperforming loans as a percentage of total loans and leases increased to 0.83% at September 30, 2024 from 0.54% as of September 30, 2023 and 0.44% at December 31, 2023. The allowance to nonperforming loan ratio was 168.77%, 298.23% and 280.31% as of September 30, 2024, December 31, 2023 and September 30, 2023, respectively.

Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at September 30, 2024.

69

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Below is an analysis of the consolidated allowance for credit losses for the nine months ended September 30, 2024 and 2023 and the year-ended December 31, 2023:

 

	September 30, 2024			September 30, 2023			December 31, 2023
	(dollars in thousands)
Balance, beginning of period	$	117,718		$	102,906		$	102,906
Day 1 allowance for credit loss on PCD acquired loans	—			27,205			27,205
Provision for credit losses - acquisition day 1 non-PCD	—			10,653			10,653
Loans charged off:
Commercial, financial, agricultural and other	11,230			9,102			19,199
Real estate construction	35			—			—
Residential real estate	361			384			561
Commercial real estate	2,047			1,689			6,277
Loans to individuals	7,148			4,649			7,230
Total loans charged off	20,821			15,824			33,267
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	633			352			498
Real estate construction	6			—			—
Residential real estate	221			128			247
Commercial real estate	166			142			151
Loans to individuals	2,306			1,388			2,219
Total recoveries	3,332			2,010			3,115
Net charge-offs	17,489			13,814			30,152
Provision for credit losses on loans and leases charged to expense	25,883			7,387			7,106
Balance, end of period	$	126,112		$	134,337		$	117,718
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.26		%	0.21		%	0.35		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding	1.41		%	1.51		%	1.31		%

70

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Income

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

	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	8,790	$	7,967	$	823	10	%
Service charges on deposit accounts	16,769		15,842		927		6
Insurance and retail brokerage commissions	7,618		7,171		447		6
Income from bank owned life insurance	4,943		3,664		1,279		35
Card-related interchange income	17,964		21,422		(3,458)		(16)
Swap fee income	88		1,029		(941)		(91)
Other income	7,463		7,114		349		5
Subtotal	63,635		64,209		(574)		(1)
Net securities losses	(5,447)		(103)		(5,344)		5,188
Gain on VISA exchange and sale	5,664		—		5,664		—
Gain on sale of mortgage loans	4,150		3,175		975		31
Gain on sale of other loans and assets	6,035		5,004		1,031		21
Derivatives mark to market	(141)		27		(168)		(622)
Total noninterest income	$	73,896	$	72,312	$	1,584	2	%

Total noninterest income, excluding net securities losses, gain on VISA exchange, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market for the nine months ended September 30, 2024 decreased $0.6 million, or 1%, compared to the nine months ended September 30, 2023. This decrease is primarily due to a $3.5 million decline in card-related interchange income resulting from the Company being subject to the Durbin Amendment to the Dodd-Frank Act beginning July 1, 2024. The Durbin Amendment is now applicable to the Company because its total assets exceeded $10.0 billion as of December 31, 2023. We estimate that the application of the interchange fee cap, as compared to the twelve months prior to the July 1, 2024 effective date, will decrease our interchange income by approximately $6.3 million in 2024 and approximately $12.8 million in 2025.

Income from bank owned life insurance increased $1.3 million, of which $1.0 million was related to an increase in policy death benefits. Service charges on deposit accounts increased $0.9 million primarily due to higher business account analysis income and increased customer activity. Trust income increased $0.8 million due to gains in the value of assets under management. Swap fee income declined $0.9 million as a result of a decrease in new interest rate swaps entered into by our commercial loan customers compared to the prior period.

Total noninterest income increased $1.6 million, or 2%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a $5.7 million gain related to the conversion and sale of Visa class B shares. Gain on sale of mortgages increased $1.0 million as a result of changes in volume and spread received on mortgage loans sold, and gain on sale of other loans and assets increased $1.0 million due to an increase in the volume and spread on the sale of SBA loans. Offsetting these gains are $5.3 million in losses recognized on the sale of $75.1 million in available for sale securities, which were sold in order to reinvest into higher yielding investments.

71

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Noninterest Expense

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

	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	111,262	$	106,639	$	4,623	4	%
Net occupancy	15,014		14,584		430		3
Furniture and equipment	13,093		12,936		157		1
Data processing	11,543		11,024		519		5
Advertising and promotion	4,177		4,652		(475)		(10)
Pennsylvania shares tax	3,454		4,013		(559)		(14)
Intangible amortization	3,656		3,773		(117)		(3)
Other professional fees and services	3,976		4,376		(400)		(9)
FDIC insurance	4,537		4,614		(77)		(2)
Other operating	26,222		25,906		316		1
Subtotal	196,934		192,517		4,417		2
Loss on sale or write-down of assets	352		97		255		263
Litigation and operational losses	3,672		3,263		409		13
Loss on early redemption of subordinated debt	369		—		369		—
Merger and acquisition related	114		8,860		(8,746)		(99)
Total noninterest expense	$	201,441	$	204,737	$	(3,296)	(2)	%

Noninterest expense decreased $3.3 million, or 2%, for the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily the result of $8.9 million in merger-related expenses associated with the Centric acquisition recognized during the comparable period in 2023. For the nine months ended September, 30, 2024, advertising and promotion expense decreased $0.5 million due to the timing and types of advertising in 2024 compared to 2023. Offsetting these decreases is a $4.6 million increase in salaries and benefits expense primarily due to annual merit salary increases, higher severance expense and an increase in the number of full-time employees. The number of full time equivalent employees totaled 1,481 at September 30, 2023 and 1,500 at September 30, 2024. Increases in net occupancy expense can be attributed to insurance costs as well as higher depreciation expenses from new or improved locations. Data processing costs increased $0.5 million due to continued investment in our digital banking and other product offerings. During the nine months ended September 30, 2024, $0.4 million in remaining subordinated debt issuance costs that were being amortized over the life of the instrument were accelerated and recognized in conjunction with the redemption of $50.0 million in subordinated debentures.

Income Tax

The provision for income taxes decreased $1.7 million for the nine months ended September 30, 2024, compared to the corresponding period in 2023.  

We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the nine months ended September 30, 2024 and 2023.

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an effective tax rate of 20.1% and 20.3% for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, our deferred tax assets totaled $53.2 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 earnings 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.

72

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, 2024 Compared to Three Months Ended September 30, 2023

Net Income

For the three months ended September 30, 2024, First Commonwealth recognized net income of $32.1 million, or $0.31 diluted earnings per share, compared to net income of $39.2 million, or $0.38 diluted earnings per share, in the three months ended September 30, 2023. The decrease in net income was primarily the result of a $1.2 million decrease in net interest income, a $4.7 million increase in the provision for credit losses and a $2.7 million increase in noninterest expense.

For the three months ended September 30, 2024, the Company’s return on average equity was 9.19% and its return on average assets was 1.08%, compared to 12.46% and 1.38%, respectively, for the three months ended September 30, 2023.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $96.9 million in the third quarter of 2024, compared to $98.1 million for the same period in 2023. The decrease in net interest income can be attributed to a 63 basis point increase in the cost of interest-bearing liabilities offset by a 31 basis point increase in the yield on interest-earning assets. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 79.6% and 79.7% for the three months ended September 30, 2024 and 2023, respectively.

The net interest margin, on a fully taxable equivalent basis, was 3.56% and 3.76% for the three months ended September 30, 2024 and 2023, respectively.

The taxable equivalent yield on interest-earning assets was 5.68% for the three months ended September 30, 2024, an increase of 31 basis points compared to the 5.37% yield for the same period in 2023. This is largely due to a 30 basis point increase in the loan portfolio yield when compared to the three months ended September 30, 2023 as a result of a higher repricing rates in 2024. Also contributing to this increase is the growth in average loans of $120.1 million. Additionally, accretion of purchase accounting marks, primarily related to the Centric acquisition, contributed $2.0 million or 7 basis points to the yield on interest-earnings assets in the three months ended September 30, 2024. For the three months ended September 30, 2023, accretion of purchase accounting marks contributed $2.4 million, or 9 basis points, to the yield on interest-earning assets.

The investment portfolio yield increased 102 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance increased $313.5 million as a result of liquidity from growth in interest-bearing liabilities. The average balance of interest-bearing deposits with banks increased from $235.8 million in 2023 to $278.0 million in 2024, while the yield decreased 14 basis points.

The cost of interest-bearing liabilities increased to 2.91% for the three months ended September 30, 2024, from 2.28% for the same period in 2023, primarily due to an increase in the cost of time deposits and savings deposits. The cost of interest-bearing demand deposits increased 46 basis points and short-term borrowings decreased 61 basis points in comparison to the same period last year. The increase in the cost of interest-bearing demand deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates on money market and time deposits. Comparing the three months ended September 30, 2024 with the comparable period in 2023, average time deposits increased $521.8 million, or 49.5%, with an increase in the cost of these deposits of 92 basis points. Other interest-bearing deposits increased on average $76.2 million, or 1.4%, compared to the three months ended September 30, 2023 and the cost of those deposits increased 60 basis points.

For the three months ended September 30, 2024, changes in interest rates negatively impacted net interest income by $0.7 million when compared with the same period in 2023. The higher yield on loans contributed to interest-earning assets positively impacting net interest income by $10.3 million, while an increase in the cost of interest-bearing liabilities negatively impacted net interest income by $11.0 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities negatively impacted net interest income by $0.5 million during the three months ended September 30, 2024, as compared to the same period in 2023. The mix of interest-earning assets resulted in an increase of $4.2 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $4.7 million. Average interest-earning assets for the three months ended September 30, 2024 increased $475.8 million, or 4.6%, compared to the same period in 2023. Average loans for the comparable period increased $120.1 million, or 1.4%. Average time deposits for the three months ended September 30, 2024 increased by $521.8 million compared to the comparable period in 2023, increasing interest expense by $4.6 million.

73

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Net interest income was negatively impacted by a $108.4 million decrease in average net free funds for the three months ended September 30, 2024 as compared to September 30, 2023. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The decline in the level of net free funds was primarily the result of a decrease in noninterest-bearing demand deposits, which decreased $232.7 million, as a result of customers becoming more rate sensitive due to higher interest rates.

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:

 

	2024		2023
	(dollars in thousands)
Interest income per Consolidated Statements of Income	$	154,323	$	139,885
Adjustment to fully taxable equivalent basis	342		313
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	154,665		140,198
Interest expense	57,808		42,128
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	96,857	$	98,070

74

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:

 

	2024						2023
	Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
	(dollars in thousands)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	278,006	$	3,838	5.49	%	$	235,761	$	3,346	5.63	%
Tax-free investment securities	20,016		133		2.64		21,439		144		2.66
Taxable investment securities	1,522,776		12,825		3.35		1,207,869		7,052		2.32
Loans and leases, net of unearned income (b)(c)	9,004,808		137,869		6.09		8,884,731		129,656		5.79
Total interest-earning assets	10,825,606		154,665		5.68		10,349,800		140,198		5.37
Noninterest-earning assets:
Cash	113,301						114,419
Allowance for credit losses	(124,070)						(135,340)
Other assets	961,695						978,179
Total noninterest-earning assets	950,926						957,258
Total Assets	$	11,776,532					$	11,307,058
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)	$	1,962,209	$	9,663	1.96	%	$	2,014,623	$	7,608	1.50	%
Savings deposits (d)	3,695,587		22,565		2.43		3,567,000		15,842		1.76
Time deposits	1,575,975		17,435		4.40		1,054,216		9,235		3.48
Short-term borrowings	541,010		6,279		4.62		504,025		6,643		5.23
Long-term debt	136,408		1,866		5.44		187,122		2,800		5.94
Total interest-bearing liabilities	7,911,189		57,808		2.91		7,326,986		42,128		2.28
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)	2,286,482						2,519,184
Other liabilities	189,571						211,447
Shareholders’ equity	1,389,290						1,249,441
Total noninterest-bearing funding sources	3,865,343						3,980,072
Total Liabilities and Shareholders’ Equity	$	11,776,532					$	11,307,058
Net Interest Income and Net Yield on Interest-Earning Assets			$	96,857	3.56	%			$	98,070	3.76	%

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the three months ended September 30, 2024 and 2023.

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

(c)Loan income includes loan fees earned.

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

75

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, 2024 compared with September 30, 2023:

 

	Analysis of Year-to-Year Changes in Net Interest Income
	Total Change		Change Due To Volume		Change Due To Rate (a)
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	492	$	599	$	(107)
Tax-free investment securities	(11)		(10)		(1)
Taxable investment securities	5,773		1,841		3,932
Loans and leases	8,213		1,752		6,461
Total interest income (b)	14,467		4,182		10,285
Interest-bearing liabilities:
Interest-bearing demand deposits	2,055		(198)		2,253
Savings deposits	6,723		570		6,153
Time deposits	8,200		4,577		3,623
Short-term borrowings	(364)		488		(852)
Long-term debt	(934)		(759)		(175)
Total interest expense	15,680		4,678		11,002
Net interest income	$	(1,213)	$	(496)	$	(717)

(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.

76

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: 

	2024				2023
	Dollars		Percentage		Dollars		Percentage
	(dollars in thousands)
Commercial, financial, agricultural and other	$	5,965	53	%	$	(2,645)	(55)	%
Time and demand	3,730		33		(3,914)		(82)
Commercial credit cards	69		1		9		—
Equipment finance	1,723		15		553		12
Time and demand other	443		4		707		15
Real estate construction	(209)		(2)		776		16
Construction other	(125)		(1)		1,207		25
Construction residential	(84)		(1)		(431)		(9)
Residential real estate	521		5		447		9
Residential first lien	249		2		553		11
Residential junior lien/home equity	272		3		(106)		(2)
Commercial real estate	3,519		31		4,338		91
Multifamily	(151)		(1)		46		1
Non-owner occupied	2,942		26		3,952		83
Owner occupied	728		6		340		7
Loans to individuals	1,447		13		1,851		39
Automobile and recreational vehicles	1,067		9		1,503		32
Consumer credit cards	81		1		38		1
Consumer other	299		3		310		6
Provision for credit losses on loans and leases	$	11,243	100	%	$	4,767	100	%
Provision for off-balance sheet credit exposure	(628)				1,118
Total provision for credit losses	$	10,615			$	5,885

The provision for credit losses on loans and leases for the three months ended September 30, 2024 increased in comparison to the three months ended September 30, 2023 by $6.5 million. The level of provision expense in the third quarter of 2024 was impacted by specific reserves for two commercial loans moved to nonaccrual status during the period, resulting in $5.5 million in specific reserves. Additionally, the provision expense reflected $8.8 million in net charges-offs, of which $5.1 million related to two commercial borrowers and resulted in $1.5 million of provision expense for the quarter. The provision for off-balance sheet credit exposure decreased $1.7 million primarily due to the level of unfunded commitments for construction and time and demand.

The level of provision expense in the third quarter of 2023 was primarily the result of an increase in loan balances and an additional $4.1 million in specific reserves for a commercial real estate loan as a result of an updated appraisal. Net charge-offs for the three months ended September 30, 2023 were $4.0 million.

77

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

 

	September 30, 2024		September 30, 2023		December 31, 2023
	(dollars in thousands)
Balance, beginning of period	$	123,654	$	133,546	$	102,906
Day 1 allowance for credit loss on PCD acquired loans	—		—		27,205
Provision for credit losses - acquisition day 1 non-PCD	—		—		10,653
Loans charged off:
Commercial, financial, agricultural and other	5,980		1,762		19,199
Real estate construction	—		—		—
Residential real estate	106		304		561
Commercial real estate	1,423		172		6,277
Loans to individuals	2,280		2,360		7,230
Total loans charged off	9,789		4,598		33,267
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	110		98		498
Real estate construction	—		—		—
Residential real estate	51		57		247
Commercial real estate	42		6		151
Loans to individuals	801		461		2,219
Total recoveries	1,004		622		3,115
Net charge-offs	8,785		3,976		30,152
Provision for credit losses on loans charged to expense	11,243		4,767		7,106
Balance, end of period	$	126,112	$	134,337	$	117,718

Noninterest Income

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

	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	3,242	$	2,949	$	293	10	%
Service charges on deposit accounts	5,840		5,600		240		4
Insurance and retail brokerage commissions	2,663		2,305		358		16
Income from bank owned life insurance	2,278		1,242		1,036		83
Card-related interchange income	4,137		7,221		(3,084)		(43)
Swap fee income	88		452		(364)		(81)
Other income	2,682		2,828		(146)		(5)
Subtotal	20,930		22,597		(1,667)		(7)
Net securities gains (losses)	88		(103)		191		(185)
Gain on VISA exchange and sale	106		—		106		—
Gain on sale of mortgage loans	1,151		1,270		(119)		(9)
Gain on sale of other loans and assets	2,576		1,027		1,549		151
Derivatives mark to market	(153)		35		(188)		(537)
Total noninterest income	$	24,698	$	24,826	$	(128)	(1)	%

Total noninterest income for the three months ended September 30, 2024 decreased $0.1 million compared to the three months ended September 30, 2023. The most significant change includes a $3.1 million decrease in card-related interchange income primarily due to the Durbin Amendment, which impacted the Company beginning July 1, 2024. Swap fee income declined

78

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

$0.4 million as a result of a reduction in new swaps entered by our commercial customers. Offsetting these decreases is a $1.0 million increase in income from bank owned life insurance, primarily due to policy death benefits and a $0.4 million increase in insurance and retail brokerage income due to growth in annuity sales. Additionally, gain on sale of other loans and assets increased $1.5 million due to the volume and spread related to the sale of SBA loans.

Noninterest Expense

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

 

	2024		2023		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	38,618	$	35,640	$	2,978	8	%
Net occupancy	4,858		4,782		76		2
Furniture and equipment	4,335		4,414		(79)		(2)
Data processing	3,879		3,857		22		1
Advertising and promotion	1,960		1,662		298		18
Pennsylvania shares tax	1,126		1,588		(462)		(29)
Intangible amortization	1,223		1,344		(121)		(9)
Other professional fees and services	1,448		1,603		(155)		(10)
FDIC insurance	1,638		1,920		(282)		(15)
Other operating	8,672		8,548		124		1
Subtotal	67,757		65,358		2,399		4
Loss on sale or write-down of assets	132		50		82		164
Litigation and operational losses	2,181		1,626		555		34
Merger and acquisition related	—		379		(379)		(100)
Total noninterest expense	$	70,070	$	67,413	$	2,657	4	%

Noninterest expense increased $2.7 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily a result of a $3.0 million increase in salaries and employee benefits expense due to annual merit increases, increased severance expense and a higher number of full time equivalent employees.

Income Tax

The provision for income taxes decreased $1.6 million for the three months ended September 30, 2024, compared to the corresponding period in 2023.  The effective tax rate increased 40 basis points from 20.4% for the three months ended September 30, 2023 to 20.8% for the three months ended September 30, 2024.

We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the three months ended September 30, 2024 and 2023.

Liquidity

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs, with cost-effective funding. We generate funds to meet these needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first nine months of 2024, the sale, maturity and redemption of investment securities provided $253.1 million in liquidity. These funds contributed to the liquidity available to originate loans, purchase investment securities and fund depositor withdrawals.

79

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following represents our expanded sources of liquidity as of September 30, 2024:

	Total Available		Amount Used		Outstanding Letters of Credit		Net Available
	(dollars in thousands)
Internal liquidity sources
Unencumbered securities	$	275,136	$	—	$	—	$	275,136
Other (excess pledged)	49,167		—		—		49,167
External liquidity sources
FHLB advances	2,418,474		3,548		197,100		2,217,826
FRB borrowings	1,626,705		516,000		—		1,110,705
Lines with other financial institutions	160,000		—		—		160,000
CDARs (1)	1,195,398		17,600		—		1,177,798
Total liquidity	$	5,724,880	$	537,148	$	197,100	$	4,990,632

(1) Reflects internal policy limit. Maximum capacity with CDARs is $1.8 billion.

Our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program is part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of September 30, 2024, the outstanding CDARS balance of $17.6 million carried an average weighted rate of 3.53% and an average original term of 364 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

Liquidity available through the Federal Reserve is a result of the FRB Borrower-in-Custody of Collateral program, which enables us to take certain loans that are not being used as collateral at the FHLB and pledge them as collateral for borrowings at the FRB. During the first quarter of 2024, borrowings of $516.0 million at a rate of 4.76% were originated under the Federal Reserve's Bank Term Funding Program in order to fund growth in loans and investments. These borrowings have a maturity date of January 16, 2025, and can be repaid without penalty at any time. Subsequent to September 30, 2024, the Company paid off $436.0 million of the borrowings under the Bank Term Funding Program.

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, 2024		December 31, 2023
	(dollars in thousands)
Noninterest-bearing demand deposits(a)	$	2,463,971	$	2,388,533
Interest-bearing demand deposits(a)	671,667		629,138
Savings deposits(a)	4,953,206		4,886,781
Time deposits	1,656,708		1,287,857
Total	$	9,745,552	$	9,192,309

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

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

During the first nine months of 2024, total deposits increased $553.2 million. Interest-bearing demand and savings deposits increased $109.0 million, time deposits increased $368.9 million and noninterest-bearing demand deposits increased $75.4 million.

The estimated total of uninsured deposits was $2.8 billion and $2.5 billion at September 30, 2024 and December 31, 2023, respectively, of which $0.9 billion and $0.8 billion were secured by pledged investment securities or letters of credit at September 30, 2024 and December 31, 2023, respectively. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.

80

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Market Risk

The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate-sensitive assets to rate-sensitive liabilities repricing within a one-year period was 0.70 and 0.69 at September 30, 2024 and December 31, 2023, respectively. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.

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

The following is the gap analysis as of September 30, 2024 and December 31, 2023: 

	September 30, 2024
	0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
	(dollars in thousands)
Loans and leases	$	3,637,934		$	452,379		$	707,259		$	4,797,572		$	3,200,940		$	865,426
Investments	60,671			53,057			123,452			237,180			688,115			739,343
Other interest-earning assets	454,535			—			—			454,535			—			1,176
Total interest-sensitive assets (ISA)	4,153,140			505,436			830,711			5,489,287			3,889,055			1,605,945
Certificates of deposit	625,573			515,465			402,499			1,543,537			112,135			1,437
Other deposits	5,624,873			—			—			5,624,873			—			—
Borrowings	617,910			210			421			618,541			52,707			—
Total interest-sensitive liabilities (ISL)	6,868,356			515,675			402,920			7,786,951			164,842			1,437
Gap	$	(2,715,216)		$	(10,239)		$	427,791		$	(2,297,664)		$	3,724,213		$	1,604,508
ISA/ISL	0.60			0.98			2.06			0.70			23.59			1,117.57
Gap/Total assets	22.66		%	0.08		%	3.57		%	19.17		%	31.08		%	13.39		%

 

	December 31, 2023
	0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
	(dollars in thousands)
Loans and leases	$	3,619,166		$	446,373		$	756,190		$	4,821,729		$	3,137,007		$	945,896
Investments	72,358			44,567			97,544			214,469			606,670			733,418
Other interest-earning assets	20,440			—			—			20,440			1,117			—
Total interest-sensitive assets (ISA)	3,711,964			490,940			853,734			5,056,638			3,744,794			1,679,314
Certificates of deposit	271,662			210,793			569,507			1,051,962			235,562			974
Other deposits	5,515,919			—			—			5,515,919			—			—
Borrowings	726,850			207			415			727,472			53,069			224
Total interest-sensitive liabilities (ISL)	6,514,431			211,000			569,922			7,295,353			288,631			1,198
Gap	$	(2,802,467)		$	279,940		$	283,812		$	(2,238,715)		$	3,456,163		$	1,678,116
ISA/ISL	0.57			2.33			1.50			0.69			12.97			1,401.76
Gap/Total assets	24.46		%	2.44		%	2.48		%	19.54		%	30.16		%	14.64		%

81

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

 

	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
September 30, 2024 ($)	$	(21,635)		$	(5,748)		$	6,883		$	12,408
September 30, 2024 (%)	(5.34)		%	(1.42)		%	1.70		%	3.06		%
December 31, 2023 ($)	$	(9,867)		$	(4,504)		$	6,215		$	11,091
December 31, 2023 (%)	(2.53)		%	(1.16)		%	1.59		%	2.84		%

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, 2024 ($)	$	(35,299)		$	(16,827)		$	17,203		$	31,981
September 30, 2024 (%)	(8.71)		%	(4.15)		%	4.25		%	7.89		%
December 31, 2023 ($)	$	(38,890)		$	(17,930)		$	18,545		$	34,788
December 31, 2023 (%)	(9.97)		%	(4.60)		%	4.76		%	8.92		%

The Company evaluates its potential interest rate sensitivity by utilizing multiple interest rate scenarios that incorporate both rising and declining rates. Results of these scenarios are impacted by variables that include the current level of interest rates, product characteristics such as floors and ceilings, the frequency with which variable rate products reset their rates, and projected pricing changes for non-maturity deposits. For example, the results in a declining rate scenario could be affected by the model's use of an assumed interest rate floor of zero. In the nine months ended September 30, 2024 and 2023, the cost of our interest-bearing liabilities averaged 2.84% and 1.84%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.63% and 5.14%, respectively.

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

Credit Risk

Management of credit risk within our loan and lease portfolio is a focus of the Company and is a continuous process in order to address changing economic and lending environments. In order to identify and manage credit risk, segment and concentration limits are established and approved by our Board of Directors’ Risk Committee in order to maintain alignment with our credit risk appetite, loan strategic plan, loan policy and underwriting guidelines. In addition, our Credit Department completes industry studies to identify potential risk in the portfolio. For example, within the commercial real estate portfolio, industry studies are completed for the following sectors: hospitality, industrial, multifamily, office, retail, senior living, healthcare and student housing.

On an annual basis, the Credit Department also reviews the commercial real estate portfolio as a whole, along with underwriting practices and loan level stress testing procedures, to enhance risk management practices and monitor commercial real estate concentrations. This review provides an overview of the portfolio to ensure that emerging risks have been identified, and documents and validates the standard interest rate and capitalization rate stress scenarios.

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.

82

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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 $4.1 million at September 30, 2024 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

We discontinue interest accruals on a loan when, based on current information and events, it is probable that we will be unable to fully collect principal or interest due according to the contractual terms of the loan. A loan is also placed on nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due. Consumer loans related to automobile and recreational vehicles are either charged off or repossessed at no later than 90 days past due.

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

Nonperforming loans and leases, including loans held for sale, increased $35.3 million to $74.7 million at September 30, 2024, compared to $39.5 million at December 31, 2023. The increase in nonperforming loans is primarily a result of $54.2 million in commercial loans that were moved to nonaccrual during the first nine months of 2024. Offsetting these additions is the payoff or sale of $12.8 million for five commercial real estate relationships and the payoff of two commercial, financial, agricultural and other relationships totaling $1.3 million.

The allowance for credit losses as a percentage of nonperforming loans was 168.77% as of September 30, 2024, compared to 298.23% at December 31, 2023, and 280.31% at September 30, 2023. The amount of individually assessed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals and updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of $14.3 million and general reserves of $111.8 million as of September 30, 2024. Specific reserves increased $9.2 million from December 31, 2023, and decreased $2.4 million from September 30, 2023. The increase from December 31, 2023 is primarily due to $9.0 million in specific reserves related to loans moved to nonaccrual during the period. The decrease from September 30, 2023 is due to the charge-off of $6.4 million related to three commercial, financial, agricultural and other relationships, all of which were fully reserved, and the payoff of loans releasing $4.4 million in specific reserves. Offsetting these are specific reserves on loans moved to nonaccrual of $6.2 million.

Criticized loans totaled $242.0 million at September 30, 2024 and represented 2.7% of the loan portfolio. The level of criticized loans increased as of September 30, 2024 when compared to December 31, 2023, by $31.8 million, or 15%. Classified loans totaled $114.8 million at September 30, 2024 compared to $87.1 million at December 31, 2023, an increase of $27.7 million, or 32%. The increase in classified loans can be attributed to the increase in nonperforming loans.

The allowance for credit losses was $126.1 million at September 30, 2024, or 1.41% of total loans and leases outstanding, compared to 1.31% reported at December 31, 2023, and 1.51% at September 30, 2023. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were 1.26% at September 30, 2024 compared to 1.26% at December 31, 2023 and 1.33% at September 30, 2023.

83

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, 2023
	2024				2023
	(dollars in thousands)
Nonperforming Loans:
Total nonperforming loans	$	74,723			$	47,924				$	39,472
Loans past due 30 to 90 days and still accruing	$	35,133			$	19,957				$	20,116
Loans past due in excess of 90 days and still accruing	$	1,191			$	2,484				$	9,436
Other real estate owned	$	669			$	765				$	422
Loans held for sale at end of period	$	46,785			$	33,127				$	29,820
Portfolio loans and leases outstanding at end of period	$	8,965,500			$	8,901,725				$	8,968,761
Average loans and leases outstanding	$	9,006,908		(a)	$	8,627,203		(a)		$	8,714,770		(b)
Nonperforming loans as a percentage of total loans and leases	0.83		%		0.54		%			0.44		%
Provision for credit losses on loans and leases (e)	$	25,883		(a)	$	7,387		(a)		$	7,106		(b)
Provision for credit losses - acquisition day 1 non-PCD	$	—			$	10,653				$	10,653
Allowance for credit losses	$	126,112			$	134,337				$	117,718
Net charge-offs	$	17,489		(a)	$	13,814		(a)		$	30,152		(b)
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.26		%		0.21		%			0.35		%
Provision for credit losses as a percentage of net charge-offs (e)	148.00		%	(a)	53.47		%	(a)		23.57		%	(b)
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	1.41		%		1.51		%			1.31		%
Allowance for credit losses as a percentage of nonperforming loans (d)	168.77		%		280.31		%			298.23		%

(a)For the nine-month period ended.

(b)For the twelve-month period ended.

(c)Does not include loans held for sale.

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

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

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

 

	September 30, 2024				December 31, 2023
	Amount		%		Amount		%
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,629,535	18	%	$	1,543,349	17	%
Real estate construction	540,775		6		597,735		7
Residential real estate	2,374,376		27		2,416,876		27
Commercial real estate	3,069,438		34		3,053,152		34
Loans to individuals	1,351,376		15		1,357,649		15
Total loans and leases, net of unearned income	$	8,965,500	100	%	$	8,968,761	100	%

During the nine months ended September 30, 2024, loans decreased $3.3 million compared to balances outstanding at December 31, 2023.

Real estate construction loans decreased $57.0 million, or 9.5%, due to the completion of commercial real estate projects that subsequently received permanent financing. Residential real estate decreased $42.5 million, or 1.8%, primarily due to sales of closed-end 1-4 family mortgage loans originated for sale. Commercial real estate loans increased $16.3 million, or 0.5%, as a result of growth in loans secured by nonresidential property, due in part to the completion of several construction projects. Loans to individuals decreased $6.3 million, or 0.5%, primarily due to declines in the automobile and recreational vehicles portfolio as well as the personal lines of credit portfolio. Commercial, financial, agricultural and other loans increased $86.2 million, or 5.6%, primarily due to growth in the equipment finance portfolio.

84

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Commercial real estate comprises 34% of our total loan portfolio. Commercial real estate loans are collateralized by real estate properties including, but not limited to, multifamily properties, office, retail, hotels and student housing. The following table summarizes the commercial real estate portfolio by type of property securing the credit.

	September 30, 2024				December 31, 2023
	Amount		%		Amount		%
	(dollars in thousands)
Land	$	4,679	0.2	%	$	3,180	0.1	%
Residential 1-4	11,273		0.4		39,776		1.3
Industrial and Storage	496,274		16.2		456,759		15.0
Multifamily	589,308		19.2		597,262		19.6
Office	515,511		16.8		550,889		18.0
Healthcare	174,077		5.6		149,909		4.9
Student Housing	96,329		3.1		88,557		2.9
Retail	767,760		25.0		750,899		24.6
Hospitality	216,057		7.0		210,485		6.9
Specialty Use	189,948		6.2		192,570		6.3
Other	8,222		0.3		12,866		0.4
Total	$	3,069,438	100.0	%	$	3,053,152	100.0	%

The following tables represent our commercial real estate portfolio by type of property securing the credit as of September 30, 2024. Total non-pass commercial real estate loans increased by $0.3 million to $115.0 million when compared to December 31, 2023.

	Pass		OAEM		Substandard Accruing		Substandard Nonaccruing		Total Non-Pass		Total		% Non-Pass
	(dollars in thousands)
Land	$	4,506	$	—	$	173	$	—	$	173	$	4,679	3.7	%
Residential 1-4	10,914		—		—		359		359		11,273		3.2
Industrial and Storage	483,808		8,421		783		3,262		12,466		496,274		2.5
Multifamily	555,590		27,824		61		5,833		33,718		589,308		5.7
Office	478,000		11,182		1,103		25,226		37,511		515,511		7.3
Healthcare	171,311		2,439		327		—		2,766		174,077		1.6
Student Housing	96,329		—		—		—		—		96,329		—
Retail	748,178		4,886		13,399		1,297		19,582		767,760		2.6
Hospitality	209,111		—		—		6,946		6,946		216,057		3.2
Specialty Use	188,621		459		619		249		1,327		189,948		0.7
Other	8,109		113		—		—		113		8,222		1.4
Total	$	2,954,477	$	55,324	$	16,465	$	43,172	$	114,961	$	3,069,438	3.7	%

The office portfolio comprises 17% of total commercial real estate loans and 33% of total commercial real estate non-pass loans. The average loan commitment size for the office portfolio is $1.0 million and the average outstanding balance as of September 30, 2024 is $0.9 million. Within the office portfolio, exposures over $1.0 million have an average debt service coverage ratio of 1.48x, which exceeds our internal guidelines of 1.35x to 1.40x, depending on property class. Additionally, for loans with exposure over $1.0 million, the office portfolio has an average loan to value of 62.1% compared to internal guidelines of 60-75%, depending on property class. Our current measure is based off of the most recent appraisal on file, the majority of which are from origination.

As previously noted, portfolio segment limits are approved by our Board of Directors' Risk Committee. These segment limits incorporate loan commitments and are based off of total Tier 1 capital plus the allowable allowance for credit losses. In the second quarter of 2024, after considering the current environment and potential risks related to the office portfolio, the segment

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

limit for the office portfolio was decreased from 65% to 50%, with the actual segment concentration at 40% as of September 30, 2024.

The following table summarizes commercial real estate loans by the location of the properties by which they are collateralized as of September 30, 2024. Some loans are collateralized by multiple properties spread over various states. In those instances, the loan is included below based on the location of the primary property collateralizing the loan.

	Balance		% of Total
	(dollars in thousands)
Pennsylvania	$	1,570,866	51	%
Ohio	1,107,632		36
New Jersey	61,934		2
Indiana	52,824		2
New York	45,597		2
Delaware	44,189		1
Other	186,396		6
	$	3,069,438	100	%

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

As indicated in the table below, commercial real estate and commercial, financial and agricultural and other loans represent a significant portion of the nonperforming loans as of September 30, 2024.

	For the Nine Months Ended September 30, 2024						As of September 30, 2024
	Net Charge- offs		% of Total Net Charge-offs		Net Charge- offs as a % of Average Loans (annualized)		Nonperforming Loans		% of Total Nonperforming Loans		Nonperforming Loans as a % of Total Loans
	(dollars in thousands)
Commercial, financial, agricultural and other	$	10,597	60.59	%	0.16	%	$	15,409	20.62	%	0.17	%
Real estate construction	29		0.17		—		5,817		7.78		0.07
Residential real estate	140		0.80		—		10,223		13.68		0.11
Commercial real estate	1,881		10.75		0.03		43,172		57.78		0.48
Loans to individuals	4,842		27.69		0.07		102		0.14		—
Total loans and leases, net of unearned income	$	17,489	100.00	%	0.26	%	$	74,723	100.00	%	0.83	%

Net charge-offs for the nine months ended September 30, 2024 totaled $17.5 million, compared to $13.8 million for the nine months ended September 30, 2023. The most significant charge-off during the nine months ended September 30, 2024 included a $5.4 million charge-off for two commercial, financial, agricultural and other loan, $3.8 million of which was fully provided for as part of Centric purchase accounting marks and a $1.0 million charge-off of a commercial real estate loan, $0.9 million of which was provided for as part of Centric purchase accounting marks. Additionally, $4.8 million in charge-offs relate to loans to individuals, primarily indirect auto loans and personal credit lines. See discussions related to the provision for credit losses and loans for more information.

Capital Resources

At September 30, 2024, shareholders’ equity was $1.4 billion, an increase of $95.3 million from December 31, 2023. The increase was primarily the result of $106.7 million in net income and a $28.7 million increase in the fair value of available for sale investments and interest rate swaps, which is reflected in the Other Comprehensive Income component of capital. Other items impacting capital include an increase due to $3.9 million in treasury stock sales and decreases due to $39.4 million of dividends paid to shareholders and $4.6 million of common stock repurchases. Cash dividends declared per common share were $0.385 for the nine months ended September 30, 2024.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

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

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

In 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in subordinated debt, of which $50 million remained outstanding at September 30, 2024, which under the regulatory rules qualifies as Tier II capital. As of September 30, 2024, this subordinated debt issuance increased the total risk-based capital ratio by 53 basis points.

In March 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the pandemic. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). The Company adopted CECL effective January 1, 2020 and elected to implement the five-year transition. Regulatory capital levels without the capital benefit at September 30, 2024 for both First Commonwealth and First Commonwealth Bank would have continued to be greater than the amounts needed to be considered “well capitalized”, as the transition provided a capital benefit of approximately 5 to 6 basis points.

As of September 30, 2024, First Commonwealth and First Commonwealth Bank met all capital adequacy requirements to which they are subject and were considered well-capitalized under the regulatory rules. To be considered well capitalized, the Company must maintain minimum Total risk-based capital, Tier I risk-based capital, Tier I leverage ratio and Common equity tier I risk-based capital as set forth in the table below:

	Actual				Minimum Capital Required			Required to be Considered Well Capitalized
	Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
	(dollars in thousands)
Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,352,337	14.50	%		$	979,228	10.50	%	$	932,598	10.00	%
First Commonwealth Bank	1,249,560		13.43			977,220		10.50		930,685		10.00
Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,186,365	12.72	%		$	792,708	8.50	%	$	746,078	8.00	%
First Commonwealth Bank	1,083,824		11.65			791,082		8.50		744,548		8.00
Tier I Capital to Average Assets
First Commonwealth Financial Corporation	$	1,186,365	10.31	%		$	460,492	4.00	%	$	575,615	5.00	%
First Commonwealth Bank	1,083,824		9.44			459,432		4.00		574,290		5.00
Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,116,365	11.97	%		$	652,820	7.00	%	$	606,189	6.50	%
First Commonwealth Bank	1,083,824		11.65			651,480		7.00		604,945		6.50

On October 29, 2024, First Commonwealth Financial Corporation declared a quarterly dividend of $0.13 per share payable on November 22, 2024 to shareholders of record as of November 8, 2024. The timing and amount of future dividends are at the

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.

In October 2021, a share repurchase program was authorized by the Board of Directors for up to an additional $25.0 million in shares of the Company's common stock. On April 24, 2023, the Board of Directors authorized a $25 million increase in the share repurchase program. As of September 30, 2024, 2,661,388 common shares had been repurchased under these program at an average price of $13.28 per share. During the nine months ended September 30, 2024, 169,811 common shares were repurchased under these programs at an average price of $16.24 per share.

New Accounting Pronouncements

In December 2023, FASB released Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires additional disclosure information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state and foreign income taxes. ASU 2023-09 also requires greater detail about individual reconciling items in the rate reconciliation for those items that exceed a specified threshold. In addition to the new rate reconciliation disclosures, ASU 2023-09 requires information related to taxes paid (net of refunds received) to be disaggregated for federal, state and foreign taxes, along with further disaggregation for specific jurisdictions, to the extent the related amounts exceed a quantitative threshold. ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied prospectively, with an option for retrospective application to each period in the financial statements. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

In November 2023, FASB released Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis. ASU 2023-07 does not change how an entity identifies its operating segments, but does require that an entity that has a single reportable segment, such as First Commonwealth, to provide the required enhanced disclosures. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 should be applied retrospectively to all prior periods presented in the consolidated financial statements. The Company is in the process of assessing the impact of the adoption of ASU 2023-07 on its consolidated financial statements and related disclosures.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

ITEM 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 under the Securities Exchange Act of 1-934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission.

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1.     LEGAL PROCEEDINGS

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

ITEM 1A.    RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

On October 26, 2021, a share repurchase program was authorized for up to $25.0 million in shares of the Company's common stock with a $25 million increase in April of 2023. The following table details the amount of shares repurchased under this program in the second quarter of 2024:

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, 2024	—	$	—	—	946,040
August 31, 2024	—	—		—	993,287
September 30, 2024	146,850	16.83		146,850	853,252
Total	146,850	$	16.83	146,850
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $18.08 at July 31, 2024, $17.22 at August 31, 2024 and $17.15 at September 30, 2024.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

    None

ITEM 4.    MINE SAFETY DISCLOSURES

    Not applicable

ITEM 5.    OTHER INFORMATION

    None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during quarter ended September 30, 2024, as such terms are defined under Item 408(a) of Regulation S-K. On September 17, 2024, the Corporation entered into a Rule 10b5-1 Issuer Repurchase Plan with a registered broker to effect repurchases of the Corporation’s common stock under the Corporation’s treasury stock repurchase program. The 10b5-1 issuer repurchase plan will terminate upon the earlier of $10,000,000 in shares of common stock authorized for repurchase having been repurchased or November 1, 2024.

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PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 6.     EXHIBITS

Exhibit Number	Description	Incorporated by Reference to
10.1	Separation Agreement dated August 15, 2024 between First Commonwealth Financial Corporation and Brian G. Karrip	Filed herewith
10.2	Change of Control Agreement dated August 16, 2024 between First Commonwealth Financial Corporation and Brian J. Sohocki	Filed herewith
10.3	Employment Agreement dated August 16, 2024 between First Commonwealth Financial Corporation and Brian J. Sohocki	Filed herewith
10.4	Restricted Stock Agreement dated August 16, 2024 between First Commonwealth Financial Corporation and Brian J. Sohocki	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 12, 2024	/s/ T. Michael Price
	T. Michael Price President and Chief Executive Officer
DATED: November 12, 2024	/s/ James R. Reske
	James R. Reske Executive Vice President, Chief Financial Officer and Treasurer

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