0000712537us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-30SpecialMentionMemberfcf:TermLoanReceivableOriginatedFiveOrMoreYearsPriorMemberus-gaap:JuniorLienMember2020-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202021
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)
Pennsylvania25-1428528
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
601 Philadelphia Street
IndianaPA15701
(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)
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 NovemberAugust 5, 2020,2021, was 96,132,751.95,938,473.

Table of Contents


FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
PART I.
ITEM 1.
Consolidated Statements of Financial Condition (Unaudited)
3
Consolidated Statements of Income (Unaudited)
4
Consolidated Statements of Comprehensive Income (Unaudited)
5
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
6
Consolidated Statements of Cash Flows (Unaudited)
8
Notes to the Unaudited Consolidated Financial Statements
9
ITEM 2.
47
ITEM 3.
72
ITEM 4.
72
PART II.
ITEM 1.
73
ITEM 1A.
73
ITEM 2.
73
ITEM 3.
73
ITEM 4.
73
ITEM 5.
73
ITEM 6.
74
75

2
Table of Contents



ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

September 30, 2020December 31, 2019
 (dollars in thousands, except share data)
Assets
Cash and due from banks$97,060 $102,346 
Interest-bearing bank deposits283,037 19,510 
Securities available for sale, at fair value908,236 902,292 
Securities held to maturity, at amortized cost (Fair value of $276,988 and $338,718 at September 30, 2020 and December 31,2019, respectively)268,638 337,123 
Other investments12,966 16,761 
Loans held for sale37,998 15,989 
Loans:
Portfolio loans6,949,716 6,189,148 
Allowance for credit losses(88,307)(51,637)
Net loans6,861,409 6,137,511 
Premises and equipment, net(1)
128,041 137,268 
Other real estate owned1,079 2,228 
Goodwill303,328 303,328 
Amortizing intangibles, net14,095 16,366 
Bank owned life insurance224,660 220,723 
Other assets148,819 97,328 
Total assets$9,289,366 $8,308,773 
Liabilities
Deposits (all domestic):
Noninterest-bearing$2,301,821 $1,690,247 
Interest-bearing5,402,086 4,987,368 
Total deposits7,703,907 6,677,615 
Short-term borrowings122,356 201,853 
Subordinated debentures170,572 170,450 
Other long-term debt56,424 56,917 
Capital lease obligation6,494 6,815 
Total long-term debt233,490 234,182 
Other liabilities156,782 139,458 
Total liabilities8,216,535 7,253,108 
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued0 0 
Common stock, $1 par value per share, 200,000,000 shares authorized; 113,914,902 shares issued at September 30, 2020 and December 31, 2019, and 96,924,781 and 98,311,840 shares outstanding at September 30, 2020 and December 31, 2019, respectively113,915 113,915 
Additional paid-in capital494,682 493,737 
Retained earnings592,704 577,348 
Accumulated other comprehensive income, net19,111 5,579 
Treasury stock (16,990,121 and 15,603,062 shares at September 30, 2020 and December 31, 2019, respectively)(147,581)(134,914)
Total shareholders’ equity1,072,831 1,055,665 
Total liabilities and shareholders’ equity$9,289,366 $8,308,773 
(1)September 30, 2020 balance includes $2.6 million in available for sale assets as a result of the branch consolidation initiative.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Table of Contents


ITEM 1. Financial Statements and Supplementary Data (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
PART I.
ITEM 1.
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.
51
ITEM 3.
76
ITEM 4.
76
PART II.
ITEM 1.
77
ITEM 1A.
77
ITEM 2.
77
ITEM 3.
77
ITEM 4.
77
ITEM 5.
77
ITEM 6.
78
79

2
Table of Contents



ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)FINANCIAL CONDITION (unaudited)
For the Three Months EndedFor the Nine Months Ended
 September 30,September 30,
 2020201920202019
(dollars in thousands, except share data)
Interest Income
Interest and fees on loans$67,474 $74,714 $207,290 $218,524 
Interest and dividends on investments:
Taxable interest5,598 6,995 19,064 22,871 
Interest exempt from federal income taxes268 398 850 1,231 
Dividends159 387 536 1,419 
Interest on bank deposits94 81 163 181 
Total interest income73,593 82,575 227,903 244,226 
Interest Expense
Interest on deposits4,621 9,846 18,756 27,298 
Interest on short-term borrowings35 1,620 670 8,075 
Interest on subordinated debentures2,146 2,232 6,434 6,930 
Interest on other long-term debt356 362 1,065 656 
Interest on lease obligations66 70 199 210 
Total interest expense7,224 14,130 27,124 43,169 
Net Interest Income66,369 68,445 200,779 201,057 
Provision for credit losses11,212 2,708 49,038 9,638 
Net Interest Income after Provision for Credit Losses55,157 65,737 151,741 191,419 
Noninterest Income
Net securities gains20 9 47 15 
Trust income2,554 2,325 6,774 6,221 
Service charges on deposit accounts4,035 4,954 12,066 13,792 
Insurance and retail brokerage commissions2,156 1,912 5,982 5,887 
Income from bank owned life insurance1,547 1,540 4,963 4,408 
Gain on sale of mortgage loans6,437 2,599 13,226 6,101 
Gain on sale of other loans and assets1,871 970 3,151 3,831 
Card-related interchange income6,441 5,629 17,589 15,800 
Derivatives mark to market(160)(45)(2,122)(88)
Swap fee income41 421 864 1,634 
Other income1,827 1,865 5,314 5,356 
Total noninterest income26,769 22,179 67,854 62,957 
Noninterest Expense
Salaries and employee benefits28,823 28,674 87,573 83,205 
Net occupancy4,609 4,521 13,979 13,878 
Furniture and equipment4,033 3,904 11,468 11,396 
Data processing2,741 2,825 7,804 7,988 
Advertising and promotion1,115 1,140 3,800 3,611 
Pennsylvania shares tax1,254 1,189 3,246 3,365 
Intangible amortization939 865 2,792 2,364 
Other professional fees and services937 969 2,755 2,755 
FDIC insurance876 35 1,637 1,164 
Loss on sale or write-down of assets63 152 416 1,398 
Litigation and operational losses329 308 1,038 1,264 
Merger and acquisition related0 3,738 0 3,772 
COVID-19 related125 0 567 0 
Voluntary early retirement3,304 0 3,304 0 
Branch consolidation2,544 0 2,544 0 
Other operating6,555 6,577 18,351 20,696 
Total noninterest expense58,247 54,897 161,274 156,856 
Income Before Income Taxes23,679 33,019 58,321 97,520 
Income tax provision4,493 6,375 10,557 19,007 
Net Income$19,186 $26,644 $47,764 $78,513 
Average Shares Outstanding97,917,096 98,267,229 97,990,749 98,363,539 
Average Shares Outstanding Assuming Dilution98,160,143 98,547,898 98,224,506 98,615,787 
Per Share Data: Basic Earnings per Share
$0.20 $0.27 $0.49 $0.80 
 Diluted Earnings per Share$0.20 $0.27 $0.49 $0.80 
Cash Dividends Declared per Common Share$0.11 $0.10 $0.33 $0.30 
June 30, 2021December 31, 2020
 (dollars in thousands, except share data)
Assets
Cash and due from banks$89,505 $100,009 
Interest-bearing bank deposits194,948 256,572 
Securities available for sale, at fair value1,090,530 831,223 
Securities held to maturity, at amortized cost (Fair value of $555,820 and $369,851 at June 30, 2021 and December 31, 2020, respectively)554,225 361,844 
Other investments11,527 12,227 
Loans held for sale19,530 33,436 
Loans:
Portfolio loans6,740,535 6,761,183 
Allowance for credit losses(97,038)(101,309)
Net loans6,643,497 6,659,874 
Premises and equipment, net(1)
118,410 125,517 
Other real estate owned394 1,215 
Goodwill303,328 303,328 
Amortizing intangibles, net12,169 13,492 
Bank owned life insurance226,371 225,952 
Other assets137,968 143,415 
Total assets$9,402,402 $9,068,104 
Liabilities
Deposits (all domestic):
Noninterest-bearing$2,617,651 $2,319,958 
Interest-bearing5,267,368 5,118,708 
Total deposits7,885,019 7,438,666 
Short-term borrowings107,372 117,373 
Subordinated debentures170,694 170,612 
Other long-term debt5,918 56,258 
Capital lease obligation6,155 6,385 
Total long-term debt182,767 233,255 
Other liabilities120,825 210,193 
Total liabilities8,295,983 7,999,487 
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, NaN issued0 0 
Common stock, $1 par value per share, 200,000,000 shares authorized; 113,914,902 shares issued at June 30, 2021 and December 31, 2020, and 96,201,628 and 96,130,751 shares outstanding at June 30, 2021 and December 31, 2020, respectively113,915 113,915 
Additional paid-in capital495,899 494,683 
Retained earnings644,362 596,614 
Accumulated other comprehensive income, net7,115 17,233 
Treasury stock (17,713,274 and 17,784,151 shares at June 30, 2021 and December 31, 2020, respectively)(154,872)(153,828)
Total shareholders’ equity1,106,419 1,068,617 
Total liabilities and shareholders’ equity$9,402,402 $9,068,104 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
43
Table of Contents


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2021202020212020
(dollars in thousands, except share data)
Interest Income
Interest and fees on loans$65,367 $68,076 $133,680 $139,816 
Interest and dividends on investments:
Taxable interest6,302 6,493 11,666 13,466 
Interest exempt from federal income taxes154 267 318 582 
Dividends138 113 281 377 
Interest on bank deposits90 32 167 69 
Total interest income72,051 74,981 146,112 154,310 
Interest Expense
Interest on deposits1,433 5,686 3,485 14,135 
Interest on short-term borrowings27 47 58 635 
Interest on subordinated debentures2,136 2,142 4,264 4,288 
Interest on other long-term debt194 354 540 709 
Interest on lease obligations62 66 124 133 
Total interest expense3,852 8,295 8,471 19,900 
Net Interest Income68,199 66,686 137,641 134,410 
Provision for credit losses5,413 6,859 1,023 37,826 
Net Interest Income after Provision for Credit Losses62,786 59,827 136,618 96,584 
Noninterest Income
Net securities gains10 8 16 27 
Trust income2,706 2,109 5,222 4,220 
Service charges on deposit accounts4,310 3,286 8,357 8,031 
Insurance and retail brokerage commissions1,978 1,831 4,150 3,826 
Income from bank owned life insurance1,509 1,800 3,460 3,416 
Gain on sale of mortgage loans3,084 4,243 8,130 6,789 
Gain on sale of other loans and assets2,111 581 3,801 1,280 
Card-related interchange income7,406 5,886 13,833 11,148 
Derivatives mark to market(277)(221)1,153 (1,962)
Swap fee income1,252 609 1,398 823 
Other income1,997 1,680 3,921 3,487 
Total noninterest income26,086 21,812 53,441 41,085 
Noninterest Expense
Salaries and employee benefits28,347 28,773 57,018 58,750 
Net occupancy3,881 4,397 8,654 9,370 
Furniture and equipment3,866 3,657 7,814 7,435 
Data processing3,192 2,596 6,244 5,063 
Advertising and promotion1,355 1,535 2,679 2,685 
Pennsylvania shares tax1,258 1,254 2,090 1,992 
Intangible amortization863 919 1,729 1,853 
Other professional fees and services1,091 920 1,842 1,818 
FDIC insurance438 733 1,134 761 
Loss on sale or write-down of assets43 140 52 353 
Litigation and operational losses556 319 1,035 709 
COVID-19 related232 419 306 442 
Branch consolidation(22)0 18 0 
Other operating6,442 7,094 12,786 11,796 
Total noninterest expense51,542 52,756 103,401 103,027 
Income Before Income Taxes37,330 28,883 86,658 34,642 
Income tax provision7,711 5,032 17,269 6,064 
Net Income$29,619 $23,851 $69,389 $28,578 
Average Shares Outstanding96,012,828 97,932,333 96,019,808 98,027,980 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
For the Three Months EndedFor the Nine Months Ended
 September 30,September 30,
 2020201920202019
 (dollars in thousands)
Net Income$19,186 $26,644 $47,764 $78,513 
Other comprehensive (loss) income, before tax benefit (expense):
Unrealized holding (losses) gains on securities arising during the period(3,256)3,152 22,069 22,055 
Less: reclassification adjustment for gains on securities included in net income(20)(9)(47)(15)
Unrealized holding gains (losses) on derivatives arising during the period225 (124)(4,892)9 
Total other comprehensive (loss) income, before tax benefit (expense)(3,051)3,019 17,130 22,049 
Income tax benefit (expense) related to items of other comprehensive (loss) income640 (635)(3,598)(4,631)
Total other comprehensive (loss) income(2,411)2,384 13,532 17,418 
Comprehensive Income$16,775 $29,028 $61,296 $95,931 
4
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Average Shares Outstanding Assuming Dilution96,282,425 98,146,854 96,255,475 98,254,429 
Per Share Data: Basic Earnings per Share
$0.31 $0.24 $0.72 $0.29 
 Diluted Earnings per Share$0.31 $0.24 $0.72 $0.29 
Cash Dividends Declared per Common Share$0.115 $0.110 $0.225 $0.220 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
Table of Contents


ITEM 1. Financial Statements and Supplementary Data (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYCOMPREHENSIVE INCOME (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, 201998,311,840 $113,915 $493,737 $577,348 $5,579 $(134,914)$1,055,665 
Net income47,764 47,764 
Other comprehensive income13,532 13,532 
Cash dividends declared ($0.33 per share)(32,408)(32,408)
Treasury stock acquired(1,638,812)(14,373)(14,373)
Treasury stock reissued158,453 458 0 1,358 1,816 
Restricted stock93,300 0 487 0 348 835 
Balance at September 30, 202096,924,781 $113,915 $494,682 $592,704 $19,111 $(147,581)$1,072,831 

 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, 201898,518,668 $113,915 $492,273 $511,409 $(11,341)$(130,867)$975,389 
Net income78,513 78,513 
Other comprehensive income17,418 17,418 
Cash dividends declared ($0.30 per share)(29,562)(29,562)
Treasury stock acquired(482,608)(6,200)(6,200)
Treasury stock reissued205,021 1,014 0 1,729 2,743 
Restricted stock78,000 0 450 0 279 729 
Balance at September 30, 201998,319,081 $113,915 $493,737 $560,360 $6,077 $(135,059)$1,039,030 
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2021202020212020
 (dollars in thousands)
Net Income$29,619 $23,851 $69,389 $28,578 
Other comprehensive (loss) income, before tax benefit (expense):
Unrealized holding (losses) gains on securities arising during the period1,707 5,822 (14,097)25,325 
Less: reclassification adjustment for gains on securities included in net income(10)(8)(16)(27)
Unrealized holding gains (losses) on derivatives arising during the period(537)(536)1,305 (5,117)
Total other comprehensive (loss) income, before tax benefit (expense)1,160 5,278 (12,808)20,181 
Income tax benefit (expense) related to items of other comprehensive (loss) income(243)(1,108)2,690 (4,238)
Total other comprehensive (loss) income917 4,170 (10,118)15,943 
Comprehensive Income$30,536 $28,021 $59,271 $44,521 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
Table of Contents


ITEM 1. Financial Statements and Supplementary Data (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
 (dollars in thousands, except share and per share data)
Balance at December 31, 202096,130,751 $113,915 $494,683 $596,614 $17,233 $(153,828)$1,068,617 
Net income69,389 69,389 
Other comprehensive loss(10,118)(10,118)
Cash dividends declared ($0.225 per share)(21,641)(21,641)
Treasury stock acquired(196,119)(2,658)(2,658)
Treasury stock reissued173,907 771 0 1,493 2,264 
Restricted stock93,089 0 445 0 121 566 
Balance at June 30, 202196,201,628 $113,915 $495,899 $644,362 $7,115 $(154,872)$1,106,419 
Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity		 (dollars in thousands, except share and per share data)
(dollars in thousands, except share and per share data)
Balance at June 30, 202098,132,697 $113,915 $494,682 $584,312 $21,522 $(138,726)$1,075,705 
Balance at December 31, 2019Balance at December 31, 201998,311,840 $113,915 $493,737 $577,348 $5,579 $(134,914)$1,055,665 
Net incomeNet income19,186 19,186 Net income28,578 28,578 
Other comprehensive loss(2,411)(2,411)
Cash dividends declared ($0.11 per share)(10,794)(10,794)
Other comprehensive incomeOther comprehensive income15,943 15,943 
Cash dividends declared ($0.22 per share)Cash dividends declared ($0.22 per share)(21,614)(21,614)
Treasury stock acquiredTreasury stock acquired(1,207,916)(9,153)(9,153)Treasury stock acquired(430,896)(5,220)(5,220)
Treasury stock reissuedTreasury stock reissued0 0 0 0 0 Treasury stock reissued158,453 458 0 1,358 1,816 
Restricted stockRestricted stock0 0 0 0 298 298 Restricted stock93,300 0 487 0 50 537 
Common stock issued— — — — 
Balance at September 30, 202096,924,781 $113,915 $494,682 $592,704 $19,111 $(147,581)$1,072,831 
Balance at June 30, 2020Balance at June 30, 202098,132,697 $113,915 $494,682 $584,312 $21,522 $(138,726)$1,075,705 

 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, 201998,499,937 $113,915 $493,737 $543,566 $3,693 $(133,080)$1,021,831 
Net income26,644 26,644 
Other comprehensive income2,384 2,384 
Cash dividends declared ($0.10 per share)(9,850)(9,850)
Treasury stock acquired(180,856)— (2,240)(2,240)
Treasury stock reissued0 0 0 0 0 
Restricted stock0 0 0 0 261 261 
Common stock issuance— — — — — 
Balance at September 30, 201998,319,081 $113,915 $493,737 $560,360 $6,077 $(135,059)$1,039,030 



The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
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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 March 31, 202196,248,476 $113,915 $495,720 $625,806 $6,198 $(154,159)$1,087,480 
Net income29,619 29,619 
Other comprehensive income917 917 
Cash dividends declared ($0.115 per share)(11,063)(11,063)
Treasury stock acquired(72,724)(1,015)(1,015)
Treasury stock reissued15,376 90 0 133 223 
Restricted stock10,500 0 89 0 169 258 
Balance at June 30, 202196,201,628 $113,915 $495,899 $644,362 $7,115 $(154,872)$1,106,419 
 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 March 31, 202098,015,396 $113,915 $494,181 $571,256 $17,352 $(138,780)$1,057,924 
Net income23,851 23,851 
Other comprehensive income4,170 4,170 
Cash dividends declared ($0.110 per share)(10,795)(10,795)
Treasury stock acquired0 — 0 0 
Treasury stock reissued24,001 14 0 208 222 
Restricted stock93,300 0 487 0 (154)333 
Balance at June 30, 202098,132,697 $113,915 $494,682 $584,312 $21,522 $(138,726)$1,075,705 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
Table of Contents


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended
 September 30,
 20202019
Operating Activities(dollars in thousands)
Net income$47,764 $78,513 
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses49,038 9,638 
Deferred tax (benefit) expense(5,059)2,613 
Depreciation and amortization8,676 7,777 
Net gains on securities and other assets(12,608)(8,545)
Net amortization of premiums and discounts on securities4,662 2,871 
Income from increase in cash surrender value of bank owned life insurance(4,699)(4,405)
Increase in interest receivable(13,105)(110)
Mortgage loans originated for sale(287,196)(178,911)
Proceeds from sale of mortgage loans281,424 173,961 
Increase in interest payable575 1,180 
Decrease in income taxes payable(536)(556)
Other-net1,888 (7,193)
Net cash provided by operating activities70,824 76,833 
Investing Activities
Transactions with securities held to maturity:
Proceeds from maturities and redemptions76,841 35,163 
Purchases(9,621)(200)
Transactions with securities available for sale:
Proceeds from maturities and redemptions272,544 134,453 
Purchases(282,461)(17,401)
Purchases of FHLB stock(21,903)(29,538)
Proceeds from the redemption of FHLB stock25,698 50,103 
Proceeds from bank owned life insurance1,147 0 
Proceeds from sale of loans25,534 28,098 
Proceeds from sale of other assets4,875 5,390 
Acquisition, net of cash acquired0 332,465 
Net increase in loans(798,377)(256,168)
Purchases of premises and equipment and other assets(6,570)(14,060)
Net cash (used in) provided by investing activities(712,293)268,305 
Financing Activities
Net decrease in federal funds purchased0 (4,000)
Net decrease in other short-term borrowings(79,497)(634,088)
Net increase in deposits1,026,580 308,976 
Repayments of other long-term debt(493)(473)
Repayments of capital lease obligation(321)(300)
Proceeds from issuance of other long-term debt0 50,000 
Dividends paid(32,408)(29,562)
Proceeds from reissuance of treasury stock222 211 
Purchase of treasury stock(14,373)(6,200)
Net cash provided by (used in) financing activities899,710 (315,436)
Net increase in cash and cash equivalents258,241 29,702 
Cash and cash equivalents at January 1121,856 98,947 
Cash and cash equivalents at September 30$380,097 $128,649 
For the Six Months Ended
 June 30,
 20212020
Operating Activities(dollars in thousands)
Net income$69,389 $28,578 
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses1,023 37,826 
Deferred tax expense (benefit)2,863 (3,387)
Depreciation and amortization5,931 5,549 
Net gains on securities and other assets(13,205)(5,896)
Net amortization of premiums and discounts on securities2,588 2,993 
Income from increase in cash surrender value of bank owned life insurance(3,132)(3,149)
Decrease (increase) in interest receivable3,697 (10,218)
Mortgage loans originated for sale(210,746)(155,916)
Proceeds from sale of mortgage loans231,321 150,821 
Decrease in interest payable(357)(484)
(Decrease) increase in income taxes payable(1,870)9,349 
Other-net(14,178)(4,875)
Net cash provided by operating activities73,324 51,191 
Investing Activities
Transactions with securities held to maturity:
Proceeds from maturities and redemptions59,170 42,175 
Purchases(312,247)(200)
Transactions with securities available for sale:
Proceeds from maturities and redemptions285,216 125,162 
Purchases(560,180)(127,368)
Purchases of FHLB stock(2,134)(20,927)
Proceeds from the redemption of FHLB stock2,834 25,416 
Proceeds from bank owned life insurance3,097 201 
Proceeds from sale of loans33,824 10,335 
Proceeds from sale of other assets4,979 3,173 
Net increase in loans(17,885)(752,191)
Purchases of premises and equipment and other assets(3,909)(5,363)
Net cash used in investing activities(507,235)(699,587)
Financing Activities
Net decrease in other short-term borrowings(10,001)(93,369)
Net increase in deposits446,426 1,104,794 
Repayments of other long-term debt(50,339)(327)
Repayments of capital lease obligation(230)(213)
Dividends paid(21,641)(21,614)
Proceeds from reissuance of treasury stock222 222 
Purchase of treasury stock(2,654)(5,220)
Net cash provided by financing activities361,783 984,273 
Net (decrease) increase in cash and cash equivalents(72,128)335,877 
Cash and cash equivalents at January 1356,581 121,856 
Cash and cash equivalents at June 30$284,453 $457,733 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
89

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 its 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 ninesix months ended SeptemberJune 30, 20202021 are not necessarily indicative of the results that may be expected for the full year of 2020.2021. These interim financial statements should be read in conjunction with First Commonwealth’s 20192020 Annual Report on Form 10-K.

Note 2 Acquisition
Santander Branch Acquisition
On September 6, 2019, the Company's banking subsidiary, First Commonwealth Bank, completed its acquisition of 14 full service branches from Santander Bank N.A. ("Santander") receiving $329.5 million in cash. This acquisition further expands the Company's market into State College, Lock Haven, Williamsport and Lewisburg, Pennsylvania and included the purchase of $101.2 million in loans and $471.4 million in deposits.
The table below summarizes the final purchase price allocation and the net assets acquired (at fair value) and consideration transferred in connection with the Santander acquisition (dollars in thousands):
Consideration received
Cash received$329,533 
Total consideration received$329,533 
Fair Value of Assets Acquired
   Cash and cash equivalents2,935 
   Loans99,956 
   Premises and other equipment3,637 
   Core deposit intangible5,615 
   Other assets770 
     Total assets acquired112,913 
Fair Value of Liabilities Assumed
   Deposits471,386 
   Other Liabilities186 
      Total liabilities assumed471,572 
Total Fair Value of Identifiable Net Assets(358,659)
Goodwill$29,126 
9
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 as defined in FASB ASC Topic 805, “Business Combinations.” Accordingly, as of the date of the acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. The Company determined fair values in accordance with the guidance provided in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” Acquired loans were recorded at fair value with no carryover of the related allowance for loan losses. At the date of acquisition, none of the loans were accounted for under the guidance of ASC Topic 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.” The fair value of acquired loans and certificate of deposits is established by discounting the expected future cash flows with a market discount rate for like maturities and risk instruments. The $100.0 million fair value of acquired loans is the result of $101.2 million in loans acquired from Santander and the recognition of a net combined yield and credit mark adjustment of $1.2 million. The $471.4 million fair value of acquired deposits is the result of $471.0 million in deposits acquired and the recognition of a yield mark adjustment of $0.4 million on the certificate of deposits. A $5.6 million core deposit intangible was recognized for core deposits acquired.
The goodwill of $29.1 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with the branches acquired from Santander. The goodwill for this transaction is expected to be deducted over a 15-year period for income tax purposes.
Costs related to the acquisition totaled $3.7 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

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 and reclassification adjustments related to losses on derivatives are included in the "Other operating" line in the unaudited Consolidated Statements of Income.
For the Nine Months Ended September 30,
20202019
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized gains on securities:
Unrealized holding gains on securities arising during the period$22,069 $(4,635)$17,434 $22,055 $(4,632)$17,423 
Reclassification adjustment for gains on securities included in net income(47)10 (37)(15)3 (12)
Total unrealized gains on securities22,022 (4,625)17,397 22,040 (4,629)17,411 
Unrealized (losses) gains on derivatives:
Unrealized holding (losses) gains on derivatives arising during the period(4,892)1,027 (3,865)9 (2)7 
Reclassification adjustment for losses on derivatives included in net income0 0 0 0 0 0 
Total unrealized (losses) gains on derivatives(4,892)1,027 (3,865)9 (2)7 
Total other comprehensive income$17,130 $(3,598)$13,532 $22,049 $(4,631)$17,418 
For the Six Months Ended June 30,
20212020
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains on securities arising during the period$(14,097)$2,961 $(11,136)$25,325 $(5,319)$20,006 
Reclassification adjustment for gains on securities included in net income(16)3 (13)(27)6 (21)
Total unrealized (losses) gains on securities(14,113)2,964 (11,149)25,298 (5,313)19,985 
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the period1,305 (274)1,031 (5,117)1,075 (4,042)
Reclassification adjustment for losses on derivatives included in net income0 0 0 0 0 0 
Total unrealized gains (losses) on derivatives1,305 (274)1,031 (5,117)1,075 (4,042)
Total other comprehensive (loss) income$(12,808)$2,690 $(10,118)$20,181 $(4,238)$15,943 

10
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,
20202019
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains on securities arising during the period$(3,256)$684 $(2,572)$3,152 $(663)$2,489 
Reclassification adjustment for gains on securities included in net income(20)4 (16)(9)2 (7)
Total unrealized (losses) gains on securities(3,276)688 (2,588)3,143 (661)2,482 
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the period225 (48)177 (124)26 (98)
Reclassification adjustment for losses on derivatives included in net income0 0 0 0 0 0 
Total unrealized gains (losses) on derivatives225 (48)177 (124)26 (98)
Total other comprehensive (loss) income$(3,051)$640 $(2,411)$3,019 $(635)$2,384 
For the Three Months Ended June 30,
20212020
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized gains on securities:
Unrealized holding gains on securities arising during the period$1,707 $(358)$1,349 $5,822 $(1,223)$4,599 
Reclassification adjustment for gains on securities included in net income(10)2 (8)(8)2 (6)
Total unrealized gains on securities1,697 (356)1,341 5,814 (1,221)4,593 
Unrealized losses on derivatives:
Unrealized holding losses on derivatives arising during the period(537)113 (424)(536)113 (423)
Reclassification adjustment for losses on derivatives included in net income0 0 0 0 0 0 
Total unrealized losses on derivatives(537)113 (424)(536)113 (423)
Total other comprehensive income$1,160 $(243)$917 $5,278 $(1,108)$4,170 


The following table details the change in components of OCI for the ninesix months ended SeptemberJune 30:
20212020
 Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
 (dollars in thousands)
Balance at December 31$20,310 $(182)$(2,895)$17,233 $4,580 $365 $634 $5,579 
Other comprehensive (loss) income before reclassification adjustment(11,136)0 1,031 (10,105)20,006 0 (4,042)15,964 
Amounts reclassified from accumulated other comprehensive (loss) income(13)0 0 (13)(21)0 0 (21)
Net other comprehensive (loss) income during the period(11,149)0 1,031 (10,118)19,985 0 (4,042)15,943 
Balance at June 30$9,161 $(182)$(1,864)$7,115 $24,565 $365 $(3,408)$21,522 

20202019
 Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
 (dollars in thousands)
Balance at December 31$4,580 $365 $634 $5,579 $(11,697)$461 $(105)$(11,341)
Other comprehensive income before reclassification adjustment17,434 0 (3,865)13,569 17,423 0 7 17,430 
Amounts reclassified from accumulated other comprehensive (loss) income(37)0 0 (37)(12)0 0 (12)
Net other comprehensive income during the period17,397 0 (3,865)13,532 17,411 0 7 17,418 
Balance at September 30$21,977 $365 $(3,231)$19,111 $5,714 $461 $(98)$6,077 

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

20202019
 Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
 (dollars in thousands)
Balance at June 30$24,565 $365 $(3,408)$21,522 $3,232 $461 $0 $3,693 
Other comprehensive (loss) income before reclassification adjustment(2,572)0 177 (2,395)2,489 0 (98)2,391 
Amounts reclassified from accumulated other comprehensive (loss) income(16)0 0 (16)(7)0 0 (7)
Net other comprehensive (loss) income during the period(2,588)0 177 (2,411)2,482 0 (98)2,384 
Balance at September 30$21,977 $365 $(3,231)$19,111 $5,714 $461 $(98)$6,077 

20212020
 Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
 (dollars in thousands)
Balance at March 31$7,820 $(182)$(1,440)$6,198 $19,972 $365 $(2,985)$17,352 
Other comprehensive income before reclassification adjustment1,349 0 (424)925 4,599 0 (423)4,176 
Amounts reclassified from accumulated other comprehensive (loss) income(8)0 0 (8)(6)0 0 (6)
Net other comprehensive income during the period1,341 0 (424)917 4,593 0 (423)4,170 
Balance at June 30$9,161 $(182)$(1,864)$7,115 $24,565 $365 $(3,408)$21,522 
11
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 43 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 ninesix months ended SeptemberJune 30:
20202019
(dollars in thousands)
Cash paid during the period for:
Interest$26,687 $42,195 
Income taxes16,207 16,994 
Non-cash investing and financing activities:
Loans transferred to other real estate owned and repossessed assets3,206 2,754 
Loans transferred from held to maturity to held for sale27,391 21,620 
Loans transferred from available for sale to held to maturity1,908 0 
Gross increase in market value adjustment to securities available for sale22,022 22,041 
Gross (decrease) increase in market value adjustment to derivatives(4,892)9 
Investments committed to purchase, not settled22,644 0 
Noncash treasury stock reissuance1,594 2,531 
Net (liabilities) assets acquired through acquisition0 (361,895)
Proceeds from death benefit on bank owned life insurance not received(384)486 

20212020
(dollars in thousands)
Cash paid during the period for:
Interest$8,800 $20,493 
Income taxes16,209 130 
Non-cash investing and financing activities:
Loans transferred to other real estate owned and repossessed assets1,649 2,368 
Loans transferred from held to maturity to held for sale30,704 13,442 
Loans transferred from available for sale to held to maturity0 1,908 
Gross (decrease) increase in market value adjustment to securities available for sale(14,113)25,298 
Gross increase (decrease) in market value adjustment to derivatives1,305 (5,117)
Investments committed to purchase, not settled0 21,853 
Noncash treasury stock reissuance2,042 1,594 
Unsettled treasury stock repurchases4 0 
Proceeds from death benefit on bank owned life insurance not received(384)557 
Note 54 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 June 30,For the Six Months Ended June 30,
2021202020212020
Weighted average common shares issued113,914,902 113,914,902 113,914,902 113,914,902 
Average treasury stock shares(17,695,829)(15,788,359)(17,707,057)(15,730,604)
Average deferred compensation shares(55,582)(41,426)(55,563)(39,939)
Average unearned nonvested shares(150,663)(152,784)(132,474)(116,379)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share96,012,828 97,932,333 96,019,808 98,027,980 
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share213,982 173,095 180,052 185,023 
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share55,615 41,426 55,615 41,426 
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share96,282,425 98,146,854 96,255,475 98,254,429 
Basic Earnings per Share$0.31 $0.24 $0.72 $0.29 
Diluted Earnings per Share$0.31 $0.24 $0.72 $0.29 
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Weighted average common shares issued113,914,902 113,914,902 113,914,902 113,914,902 
Average treasury stock shares(15,821,469)(15,496,941)(15,761,114)(15,396,215)
Average deferred compensation shares(45,454)(37,411)(41,790)(37,411)
Average unearned nonvested shares(130,883)(113,321)(121,249)(117,737)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share97,917,096 98,267,229 97,990,749 98,363,539 
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share197,545 243,258 188,255 214,837 
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share45,502 37,411 45,502 37,411 
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share98,160,143 98,547,898 98,224,506 98,615,787 
Per Share Data: Basic Earnings per Share$0.20 $0.27 $0.49 $0.80 
 Diluted Earnings per Share$0.20 $0.27 $0.49 $0.80 
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 ninesix months ended SeptemberJune 30 because to do so would have been antidilutive.
20212020
Price RangePrice Range
SharesFromToSharesFromTo
Restricted Stock66,092 $13.72 $14.58 122,066 $13.72 $15.44 
Restricted Stock Units26,343 $16.41 $16.41 91,240 $12.43 $15.37 
20202019
Price RangePrice Range
SharesFromToSharesFromTo
Restricted Stock110,068 $13.72 $15.44 95,054 $12.99 $15.44 
Restricted Stock Units102,844 $12.43 $15.37 24,782 $16.62 $16.62 

12
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 65 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:
September 30, 2020December 31, 2019
 (dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit$2,080,476 $1,981,275 
Financial standby letters of credit13,879 16,630 
Performance standby letters of credit17,914 23,293 
Commercial letters of credit470 783 
June 30, 2021December 31, 2020
 (dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit$2,195,786 $2,097,628 
Financial standby letters of credit18,514 15,988 
Performance standby letters of credit16,545 16,864 
Commercial letters of credit965 783 
 
The notional amounts outstanding as of SeptemberJune 30, 20202021 include amounts issued in 20202021 of $245 thousand$0.5 million in performance standby letters of credit and $641 thousand$0.1 million in financial standby letters of credit. There were 0 commercial letters of credit issued in 2020.2021. A liability of $0.1 million has been recorded as of both SeptemberJune 30, 20202021 and December 31, 2019,2020, 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 $3.4$5.5 million and $4.5$7.4 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporated probabilityincorporates the expected loss percentage calculated for comparable loan categories as part of default, loss given default andthe allowance for credit losses for loans as well as estimated utilization for the next twelve months for each loan category and the letters of credit.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 SeptemberJune 30, 2020,2021, 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.
First Commonwealth Bank was named a defendant in ana putative class action that commenced on October 14, 2020 in the Court of Common Pleas of Allegheny County, Pennsylvania. The plaintiffs allege that the Bank violated the Pennsylvania Commercial Code by failing to provide accurate and complete notices of repossession and post-sale noticesclaims related to certain Pennsylvania customers whose motor vehicles were repossessed and later sold at public sales. Plaintiffs seek to pursue the action as a statewide class action on behalf of themselvesnotices and other allegedly similarly situated defaulting borrowers who had theirpractices in connection with the repossession of motor vehicles repossessedvehicles. On May 4, 2021, the Court granted the Bank’s preliminary objections and seeks to recover statutory damages. The Bank intends to vigorously defenddismissed the plaintiffs’ claims and any request for classcomplaint with prejudice. The plaintiffs have filed a notice of appeal of the Court’s order dismissing the complaint.
13
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

certification. The plaintiffs have not made any formal or specific financial demand and due to the preliminary status of this case any possible loss cannot be reasonably estimated at this time and is not included in the range set forth in the preceding paragraph.
Note 76 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, 2020December 31, 2019
 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$6,778 $763 $0 $7,541 $7,745 $596 $0 $8,341 
Mortgage-Backed Securities – Commercial209,175 9,377 0 218,552 186,316 2,983 (166)189,133 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential527,570 15,977 (4)543,543 660,777 4,113 (2,943)661,947 
Other Government-Sponsored Enterprises100,993 2 (2)100,993 1,000 0 0 1,000 
Obligations of States and Political Subdivisions12,965 208 (6)13,167 17,738 171 0 17,909 
Corporate Securities22,935 1,505 0 24,440 22,919 1,043 0 23,962 
Total Securities Available for Sale$880,416 $27,832 $(12)$908,236 $896,495 $8,906 $(3,109)$902,292 
 June 30, 2021December 31, 2020
 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$5,772 $555 $0 $6,327 $6,492 $738 $0 $7,230 
Mortgage-Backed Securities – Commercial326,712 4,296 (540)330,468 182,823 8,357 0 191,180 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential712,715 10,398 (4,486)718,627 481,109 14,924 0 496,033 
Other Government-Sponsored Enterprises1,000 0 (10)990 100,996 2 0 100,998 
Obligations of States and Political Subdivisions9,609 131 (59)9,681 11,154 243 0 11,397 
Corporate Securities23,126 1,350 (39)24,437 22,941 1,444 0 24,385 
Total Securities Available for Sale$1,078,934 $16,730 $(5,134)$1,090,530 $805,515 $25,708 $0 $831,223 

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 30 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.
14
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 SeptemberJune 30, 2020,2021, by contractual maturity, are shown below.
Amortized
Cost		Estimated
Fair Value
 (dollars in thousands)
Due within 1 year$104,991 $105,041 
Due after 1 but within 5 years20,225 21,260 
Due after 5 but within 10 years7,127 7,749 
Due after 10 years4,550 4,550 
136,893 138,600 
Mortgage-Backed Securities (a)743,523 769,636 
Total Debt Securities$880,416 $908,236 
Amortized
Cost		Estimated
Fair Value
 (dollars in thousands)
Due within 1 year$5,000 $5,058 
Due after 1 but within 5 years12,871 13,610 
Due after 5 but within 10 years15,864 16,440 
Due after 10 years0 0 
33,735 35,108 
Mortgage-Backed Securities (a)1,045,199 1,055,422 
Total Debt Securities$1,078,934 $1,090,530 
 
(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 $216.0$332.5 million and a fair value of $226.1$336.8 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $527.6$712.7 million and a fair value of $543.5$718.6 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 maturities and other-than-temporary impairment chargesmaturities related to securities held to maturity and securities available for sale were as follows for the ninesix months ended SeptemberJune 30:
20202019
 (dollars in thousands)
Proceeds from sales$0 $0 
Gross gains (losses) realized:
Sales transactions:
Gross gains$0 $0 
Gross losses0 0 
0 0 
Maturities
Gross gains47 15 
Gross losses0 0 
47 15 
Net gains and impairment$47 $15 
20212020
 (dollars in thousands)
Proceeds from sales$0 $0 
Gross gains (losses) realized:
Sales transactions:
Gross gains$0 $0 
Gross losses0 0 
0 0 
Maturities
Gross gains16 27 
Gross losses0 0 
16 27 
Net gains and impairment$16 $27 
Securities available for sale with an estimated fair value of $865.1$838.4 million and $584.8$792.1 million were pledged as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively, to secure public deposits and for other purposes required or permitted by law.
15
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Securities Held to Maturity
Below is an analysis of the amortized cost and fair values of debt securities held to maturity at:
 June 30, 2021December 31, 2020
 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$2,652 $128 $0 $2,780 $2,766 $138 $0 $2,904 
Mortgage-Backed Securities- Commercial102,982 818 (728)103,072 36,799 1,441 0 38,240 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential384,392 3,712 (2,645)385,459 277,351 5,389 (10)282,730 
Mortgage-Backed Securities – Commercial8,527 275 0 8,802 9,737 344 0 10,081 
Other Government-Sponsored Enterprises21,747 0 (452)21,295 0 0 0 0 
Obligations of States and Political Subdivisions32,925 566 (79)33,412 34,391 705 0 35,096 
Debt Securities Issued by Foreign Governments1,000 0 0 1,000 800 0 0 800 
Total Securities Held to Maturity$554,225 $5,499 $(3,904)$555,820 $361,844 $8,017 $(10)$369,851 
 September 30, 2020December 31, 2019
 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$2,937 $151 $0 $3,088 $3,392 $57 $0 $3,449 
Mortgage-Backed Securities- Commercial41,334 1,537 0 42,871 51,291 18 (184)51,125 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential171,100 5,646 (19)176,727 229,667 1,377 (294)230,750 
Mortgage-Backed Securities – Commercial10,334 375 0 10,709 12,081 67 0 12,148 
Obligations of States and Political Subdivisions42,133 661 (1)42,793 40,092 554 0 40,646 
Debt Securities Issued by Foreign Governments800 0 0 800 600 0 0 600 
Total Securities Held to Maturity$268,638 $8,370 $(20)$276,988 $337,123 $2,073 $(478)$338,718 
The amortized cost and estimated fair value of debt securities held to maturity at SeptemberJune 30, 2020,2021, 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$4,949 $4,974 
Due after 1 but within 5 years11,195 11,310 
Due after 5 but within 10 years19,760 20,232 
Due after 10 years7,029 7,077 
42,933 43,593 
Mortgage-Backed Securities (a)225,705 233,395 
Total Debt Securities$268,638 $276,988 
Amortized
Cost		Estimated
Fair Value
 (dollars in thousands)
Due within 1 year$3,465 $3,481 
Due after 1 but within 5 years4,772 4,826 
Due after 5 but within 10 years43,634 43,558 
Due after 10 years3,801 3,842 
55,672 55,707 
Mortgage-Backed Securities (a)498,553 500,113 
Total Debt Securities$554,225 $555,820 
(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 $44.3$105.6 million and a fair value of $46.0$105.9 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $181.4$392.9 million and a fair value of $187.4$394.3 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.
Securities held to maturity with an amortized cost of $257.6$348.8 million and $306.8$228.1 million were pledged as of SeptemberJune 30, 20202021 and December 31, 2019,2020, 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
16
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. As of SeptemberJune 30, 20202021 and December 31, 2019,2020, our FHLB stock totaled $11.3$9.9 million and $15.1$10.6 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 ninesix months ended SeptemberJune 30, 2020.2021.
As of both SeptemberJune 30, 20202021 and December 31, 2019,2020, "Other investments" also includes $1.7 million in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the nine-monthsthree-months ended SeptemberJune 30, 20202021 and 2019,2020, there were 0 gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.
Impairment of Investment Securities
As required by FASB ASC Topic 320, “Investments – DebtWe 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 Equity Securities,” credit-related other-than-temporarynear-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 debt securitiesa 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 recognizedrecorded and
included in earnings while non-credit related other-than-temporary impairment on debt securities not expected to be sold is recognized in OCI. During the nine months ended September 30, 2020 and 2019, 0 other-than-temporary impairment charges were recognized.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.
We review our investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, 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, or be required 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, our cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. In addition, the risk of future other-than-temporary impairment may be influenced by weakness in the U.S. economy or changes in real estate values.
The following table presents the gross unrealized losses and estimated fair values at SeptemberJune 30, 20202021 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 Months12 Months or MoreTotal
 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-Sponsored Enterprises:
Mortgage-Backed Securities – Residential$10,777 $(23)$0 $0 $10,777 $(23)
Other Government-Sponsored Enterprises998 (2)0 0 998 (2)
Obligations of States and Political Subdivisions2,207 (7)— — 2,207 (7)
Total Securities$13,982 $(32)$0 $0 $13,982 $(32)
 Less Than 12 Months12 Months or MoreTotal
 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 – Commercial$191,215 $(1,268)$0 $0 $191,215 $(1,268)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential520,020 (7,131)0 0 520,020 (7,131)
Other Government-Sponsored Enterprises22,285 (462)0 0 22,285 (462)
Obligations of States and Political Subdivisions7,237 (138)0 0 7,237 (138)
Corporate Securities5,136 (39)0 0 5,136 (39)
Total Securities$745,893 $(9,038)$0 $0 $745,893 $(9,038)
    
At SeptemberJune 30, 2020,2021, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised 78%98% of total unrealized losses due to changes in market interest rates. At SeptemberJune 30, 2020,2021, there are 1044 debt securities in an unrealized loss position.
17
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, 20192020 by investment category and time frame for which securities have been in a continuous unrealized loss position:
 Less Than 12 Months12 Months or MoreTotal
 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 - Commercial$54,501 $(201)$16,365 $(149)$70,866 $(350)
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential111,969 (436)219,015 (2,801)330,984 (3,237)
Total Securities$166,470 $(637)$235,380 $(2,950)$401,850 $(3,587)
 Less Than 12 Months12 Months or MoreTotal
 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-Sponsored Enterprises:
Mortgage-Backed Securities – Residential$3,755 $(10)$0 $0 $3,755 $(10)
Total Securities$3,755 $(10)$0 $0 $3,755 $(10)
As of SeptemberJune 30, 2020,2021, our corporate securities had an amortized cost and an estimated fair value of $22.9$23.1 million and $24.4 million, respectively. As of December 31, 2019,2020, our corporate securities had an amortized cost and estimated fair value of $22.9 million and $24.0$24.4 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were 0was 1 corporate securitiessecurity in an unrealized loss position as of both SeptemberJune 30, 20202021 and NaN as of December 31, 2019.2020. When unrealized losses exist, on these investments, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether issues in anthe unrealized loss position were other-than-temporarily impaired.is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.

There was 0 expected credit related impairment recognized on investment securities during the six months ended June 30, 2021 and 2020.
Note 87 Loans and Allowance for Credit Losses
1Loans are presented in the Consolidated Statements of Financial Condition net of deferred fees and costs, and discounts related to purchased loans. Net deferred fees were $7.1 million and $6.0 million as of June 30, 2021 and December 31, 2020, respectively, and discounts on purchased loans were $6.5 million and $7.0 million at March 31, 2021 and December 31, 2020, respectively. The following table provides outstanding balances related to each of our loan types:
September 30, 2020December 31, 2019
OriginatedAcquiredTotalOriginatedAcquiredTotal
 (dollars in thousands)
Commercial, financial, agricultural and other$1,711,614 $25,122 $1,736,736 $1,212,026 $29,827 $1,241,853 
Real estate construction450,589 2,400 452,989 442,777 6,262 449,039 
Residential real estate1,534,949 209,071 1,744,020 1,415,808 265,554 1,681,362 
Commercial real estate2,088,217 127,094 2,215,311 1,958,346 159,173 2,117,519 
Loans to individuals790,471 10,189 800,660 685,416 13,959 699,375 
Total loans$6,575,840 $373,876 $6,949,716 $5,714,373 $474,775 $6,189,148 
June 30, 2021December 31, 2020
 (dollars in thousands)
Commercial, financial, agricultural and other$1,374,177 $1,555,986 
Time and demand1,360,065 1,541,382 
Commercial credit cards14,112 14,604 
Real estate construction414,816 427,221 
Residential real estate1,828,783 1,750,592 
Residential first lien1,218,300 1,144,323 
Residential junior lien/home equity610,483 606,269 
Commercial real estate2,205,758 2,211,569 
Multifamily385,905 371,239 
Nonowner occupied1,429,192 1,421,151 
Owner occupied390,661 419,179 
Loans to individuals917,001 815,815 
Automobile829,150 712,800 
Consumer credit cards10,834 12,360 
Consumer other77,017 90,655 
Total loans$6,740,535 $6,761,183 
In the table above, originated Commercial, financial, agricultural and other loans at SeptemberJune 30, 2021 and December 31, 2020 includes $573.5$292.4 million and $478.9 million, respectively, in Paycheck Protection Program ("PPP") loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully
18
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. Although the Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liability to the Company associated with participation in the program.
On March 27, 2020, the CARES Act was signed into law, providing banking organizations with optional, temporary relief from complying with CECL. The Company elected to defer its adoption of CECL until the fourth quarter 2020. At the end of the deferral period, CECL was adopted effective January 1, 2020. The allowance for credit losses for the interim period ending June 30, 2020, was calculated in accordance with previously applicable GAAP.
First Commonwealth’s loan portfolio includes five primary loan categories. When calculating the allowance for credit losses these categories are classified into eleven 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.
Real estate construction
Includes both 1-4 family and commercial construction loans. The risk and loss characteristics of the construction category are different than other real estate secured categories due to the collateral being at various stages of completion. The primary macroeconomic drivers for estimating credit losses for this category 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 could 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 rental vacancy.
Nonowner Occupied - Consists of loans secured by commercial real estate non-owner occupied and provides different loss characteristics than other real estate categories. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Owner Occupied - Consists of loans secured by commercial real estate owner occupied properties. The risk and loss characteristics of this category were considered different than other real estate categories because it is owner occupied and would impact the ability to conduct business. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
19
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loans to individuals
Automobile - 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 the level of household debt.
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 June 30, 2021 was 5.76% and during the one-year forecast period it was projected to average 5.37%, with a peak of 5.76%.
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.
1
18
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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.

SubstandardWell-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.

DoubtfulLoans 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 use of creditworthiness categories to grade loans permits management’s use of migration analysis to estimate a portion of credit risk.
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. Movement between these rating categories provides a predictive measure of credit losses and therefore assists in determining the appropriate level for the loan loss reserves. 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. Loans that migrate towards higher risk rating levels generally have an increased risk of default, whereas loans that migrate toward lower risk ratings generally will result in a lower risk factor being applied to those related loan balances.
The following tables represent our credit risk profile by creditworthiness:
 September 30, 2020
 Commercial, financial, agricultural and otherReal estate constructionResidential real estateCommercial real estateLoans to individualsTotal
 (dollars in thousands)
Originated loans
Pass$1,649,458 $450,513 $1,527,225 $1,977,234 $790,222 $6,394,652 
Non-Pass
OAEM37,033 22 915 69,450 0 107,420 
Substandard25,123 54 6,809 41,533 249 73,768 
Doubtful0 0 0 0 0 0 
Total Non-Pass62,156 76 7,724 110,983 249 181,188 
Total$1,711,614 $450,589 $1,534,949 $2,088,217 $790,471 $6,575,840 
Acquired loans
Pass$23,405 $1,588 $207,233 $123,703 $10,178 $366,107 
Non-Pass
OAEM196 504 511 136 0 1,347 
Substandard1,521 308 1,327 3,255 11 6,422 
Doubtful0 0 0 0 0 0 
Total Non-Pass1,717 812 1,838 3,391 11 7,769 
Total$25,122 $2,400 $209,071 $127,094 $10,189 $373,876 
1920
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 December 31, 2019
 Commercial, financial, agricultural and otherReal estate constructionResidential real estateCommercial real estateLoans to individualsTotal
 (dollars in thousands)
Originated loans
Pass$1,171,363 $442,751 $1,406,845 $1,918,690 $685,108 $5,624,757 
Non-Pass
OAEM29,359 26 475 13,533 0 43,393 
Substandard11,304 0 8,488 26,123 308 46,223 
Doubtful0 0 0 0 0 0 
Total Non-Pass40,663 26 8,963 39,656 308 89,616 
Total$1,212,026 $442,777 $1,415,808 $1,958,346 $685,416 $5,714,373 
Acquired loans
Pass$27,696 $5,697 $262,630 $153,814 $13,947 $463,784 
Non-Pass
OAEM2,009 565 537 2,072 0 5,183 
Substandard122 0 2,387 3,287 12 5,808 
Doubtful0 0 0 0 0 0 
Total Non-Pass2,131 565 2,924 5,359 12 10,991 
Total$29,827 $6,262 $265,554 $159,173 $13,959 $474,775 
The following tables represent our credit risk profile by creditworthiness:
 June 30, 2021
Non-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)
Commercial, financial, agricultural and other$1,329,974 $28,567 $15,636 $0 $0 $44,203 $1,374,177 
Time and demand1,315,862 28,567 15,636 0 0 44,203 1,360,065 
Commercial credit cards14,112 0 0 0 0 0 14,112 
Real estate construction413,059 1,703 54 0 0 1,757 414,816 
Residential real estate1,820,506 1,531 6,746 0 0 8,277 1,828,783 
Residential first lien1,213,599 1,457 3,244 0 0 4,701 1,218,300 
Residential junior lien/home equity606,907 74 3,502 0 0 3,576 610,483 
Commercial real estate2,009,839 162,669 33,250 0 0 195,919 2,205,758 
Multifamily370,681 14,703 521 0 0 15,224 385,905 
Nonowner occupied1,263,952 138,440 26,800 0 0 165,240 1,429,192 
Owner occupied375,206 9,526 5,929 0 0 15,455 390,661 
Loans to individuals916,730 0 271 0 0 271 917,001 
Automobile828,936 0 214 0 0 214 829,150 
Consumer credit cards10,834 0 0 0 0 0 10,834 
Consumer other76,960 0 57 0 0 57 77,017 
Total loans$6,490,108 $194,470 $55,957 $0 $0 $250,427 $6,740,535 
 December 31, 2020
Non-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)
Commercial, financial, agricultural and other$1,491,916 $48,233 $15,837 $0 $0 $64,070 $1,555,986 
Time and demand1,477,312 48,233 15,837 0 0 64,070 1,541,382 
Commercial credit cards14,604 0 0 0 0 0 14,604 
Real estate construction426,663 504 54 0 0 558 427,221 
Residential real estate1,740,992 1,902 7,698 0 0 9,600 1,750,592 
Residential first lien1,138,409 1,780 4,134 0 0 5,914 1,144,323 
Residential junior lien/home equity602,583 122 3,564 0 0 3,686 606,269 
Commercial real estate1,983,258 175,995 52,316 0 0 228,311 2,211,569 
Multifamily369,883 131 1,225 0 0 1,356 371,239 
Nonowner occupied1,216,252 161,336 43,563 0 0 204,899 1,421,151 
Owner occupied397,123 14,528 7,528 0 0 22,056 419,179 
Loans to individuals815,541 0 274 0 0 274 815,815 
Automobile712,539 0 261 0 0 261 712,800 
Consumer credit cards12,360 0 0 0 0 0 12,360 
Consumer other90,642 0 13 0 0 13 90,655 
Total loans$6,458,370 $226,634 $76,179 $0 $0 $302,813 $6,761,183 

21
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by origination year:
June 30, 2021
Term LoansRevolving Loans
20212020201920182017PriorTotal
(dollars in thousands)
Time and demand$335,532 $188,651 $160,849 $109,102 $59,017 $133,929 $372,985 $1,360,065 
Pass335,532 188,552 149,819 108,430 52,920 118,387 362,222 1,315,862 
OAEM0 89 10,943 135 2,147 7,373 7,880 28,567 
Substandard0 10 87 537 3,950 8,169 2,883 15,636 
Commercial credit cards0 0 0 0 0 0 14,112 14,112 
Pass0 0 0 0 0 0 14,112 14,112 
Real estate construction42,696 172,170 137,732 49,029 10,255 1,799 1,135 414,816 
Pass42,694 170,912 137,732 49,029 10,255 1,548 889 413,059 
OAEM2 1,258 0 0 0 197 246 1,703 
Substandard0 0 0 0 0 54 0 54 
Residential first lien195,705 354,035 150,421 108,962 89,214 317,986 1,977 1,218,300 
Pass195,694 354,013 150,391 108,596 89,073 313,932 1,900 1,213,599 
OAEM0 0 0 75 0 1,305 77 1,457 
Substandard11 22 30 291 141 2,749 0 3,244 
Residential junior lien/home equity25,133 2,458 4,511 3,680 1,442 6,836 566,423 610,483 
Pass25,133 2,458 4,430 3,680 1,442 6,676 563,088 606,907 
OAEM0 0 0 0 0 64 10 74 
Substandard0 0 81 0 0 96 3,325 3,502 
Multifamily56,127 75,824 16,654 55,568 72,187 108,109 1,436 385,905 
Pass56,127 75,824 16,654 55,568 58,027 107,045 1,436 370,681 
OAEM0 0 0 0 14,160 543 0 14,703 
Substandard0 0 0 0 0 521 0 521 
Nonowner occupied62,682 106,872 201,303 165,753 208,921 679,702 3,959 1,429,192 
Pass62,682 106,872 201,303 155,781 181,049 552,582 3,683 1,263,952 
OAEM0 0 0 9,972 20,955 107,392 121 138,440 
Substandard0 0 0 0 6,917 19,728 155 26,800 
Owner occupied42,351 56,499 61,763 39,319 34,847 150,834 5,048 390,661 
Pass42,351 54,856 60,212 37,655 33,528 141,773 4,831 375,206 
OAEM0 1,430 658 877 1,295 5,233 33 9,526 
Substandard0 213 893 787 24 3,828 184 5,929 
Automobile261,079 302,782 159,487 69,074 28,644 8,084 0 829,150 
Pass261,079 302,782 159,399 69,058 28,616 8,002 0 828,936 
Substandard0 0 88 16 28 82 0 214 
Consumer credit cards0 0 0 0 0 0 10,834 10,834 
Pass0 0 0 0 0 0 10,834 10,834 
Consumer other2,414 6,060 11,100 7,362 1,171 6,131 42,779 77,017 
Pass2,414 6,060 11,100 7,362 1,171 6,086 42,767 76,960 
Substandard0 0 0 0 0 45 12 57 
Total$1,023,719 $1,265,351 $903,820 $607,849 $505,698 $1,413,410 $1,020,688 $6,740,535 

22
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2020
Term LoansRevolving Loans
20202019201820172016PriorTotal
(dollars in thousands)
Time and demand$598,053 $193,601 $142,224 $72,277 $74,228 $83,313 $377,686 $1,541,382 
Pass597,405 189,834 140,473 63,137 68,007 65,418 353,038 1,477,312 
OAEM93 3,373 972 8,820 6,182 8,043 20,750 48,233 
Substandard555 394 779 320 39 9,852 3,898 15,837 
Commercial credit cards0 0 0 0 0 0 14,604 14,604 
Pass0 0 0 0 0 0 14,604 14,604 
Real estate construction150,493 133,195 104,167 34,803 389 1,009 3,165 427,221 
Pass150,493 133,195 104,167 34,803 389 709 2,907 426,663 
OAEM0 0 0 0 0 246 258 504 
Substandard0 0 0 0 0 54 0 54 
Residential first lien316,052 184,550 142,823 110,365 91,495 297,057 1,981 1,144,323 
Pass316,028 184,533 142,467 110,260 91,059 292,158 1,904 1,138,409 
OAEM0 0 83 0 100 1,520 77 1,780 
Substandard24 17 273 105 336 3,379 0 4,134 
Residential junior lien/home equity3,055 5,783 4,545 2,005 1,303 7,127 582,451 606,269 
Pass3,055 5,698 4,545 2,005 1,303 6,909 579,068 602,583 
OAEM0 0 0 0 0 112 10 122 
Substandard0 85 0 0 0 106 3,373 3,564 
Multifamily76,249 16,287 69,439 66,963 34,383 106,328 1,590 371,239 
Pass76,249 16,287 69,439 66,963 34,383 104,972 1,590 369,883 
OAEM0 0 0 0 0 131 0 131 
Substandard0 0 0 0 0 1,225 0 1,225 
Nonowner occupied105,861 199,280 161,018 214,915 217,883 518,052 4,142 1,421,151 
Pass105,861 190,301 139,643 181,659 175,148 419,900 3,740 1,216,252 
OAEM0 8,979 21,375 26,339 37,762 66,752 129 161,336 
Substandard0 0 0 6,917 4,973 31,400 273 43,563 
Owner occupied59,519 72,313 61,079 40,796 27,415 152,555 5,502 419,179 
Pass58,551 70,726 55,478 39,351 26,359 141,376 5,282 397,123 
OAEM968 684 4,736 1,421 114 6,572 33 14,528 
Substandard0 903 865 24 942 4,607 187 7,528 
Automobile350,293 202,923 96,355 45,218 14,285 3,726 0 712,800 
Pass350,293 202,827 96,336 45,187 14,255 3,641 0 712,539 
Substandard0 96 19 31 30 85 0 261 
Consumer credit cards0 0 0 0 0 0 12,360 12,360 
Pass0 0 0 0 0 0 12,360 12,360 
Consumer other7,814 14,464 10,752 1,965 711 6,383 48,566 90,655 
Pass7,814 14,464 10,752 1,965 711 6,373 48,563 90,642 
Substandard0 0 0 0 0 10 3 13 
Total$1,667,389 $1,022,396 $792,402 $589,307 $462,092 $1,175,550 $1,052,047 $6,761,183 

23
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Portfolio Risks
The credit quality of our loan portfolio can potentially represent significant risk to our earnings, capital and liquidity. First Commonwealth devotes substantial resources to managing this risk primarily through our credit administration department that develops and administers policies and procedures for underwriting, maintaining, monitoring and collecting loans. Credit administration is independent of lending departments and oversight is provided by the Credit Committee of the First Commonwealth Board of Directors.
Criticized loans have been evaluated when determiningTotal net charge-offs for the appropriateness of the allowance for credit losses, which we believe is adequate to absorb losses inherent to the portfolio as of Septembersix months ended June 30, 2020. However, changes in economic conditions, interest rates, borrower financial condition, delinquency trends or previously established fair values of collateral factors could significantly change those judgmental estimates.
20
ITEM 1. Financial Statements2021 and Supplementary Data2020 were $7.2 million and $8.0 million, respectively.
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Age Analysis of Past Due Loans by Segment
The following tables delineate the aging analysis of the recorded investments in past due loans as of SeptemberJune 30, 20202021 and December 31, 2019.2020. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.
September 30, 2020 June 30, 2021
30 - 59
days
past due		60 - 89
days
past
due		90 days
or
greater
and still
accruing		NonaccrualTotal past
due and
nonaccrual		CurrentTotal 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal
(dollars in thousands) (dollars in thousands)
Originated loans
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$1,978 $67 $17 $4,389 $6,451 $1,705,163 $1,711,614 Commercial, financial, agricultural and other$166 $48 $8 $12,349 $12,571 $1,361,606 $1,374,177 
Time and demandTime and demand116 6 0 12,349 12,471 1,347,594 1,360,065 
Commercial credit cardsCommercial credit cards50 142 8 0 100 14,012 14,112 
Real estate constructionReal estate construction0 0 0 54 54 450,535 450,589 Real estate construction0 0 0 54 54 414,762 414,816 
Residential real estateResidential real estate2,022 1,554 458 5,960 9,994 1,524,955 1,534,949 Residential real estate3,064 578 434 6,102 10,178 1,818,605 1,828,783 
Residential first lienResidential first lien2,116 381 367 2,817 5,681 1,212,619 1,218,300 
Residential junior lien/home equityResidential junior lien/home equity948 197 67 3,285 4,497 605,986 610,483 
Commercial real estateCommercial real estate517 122 0 30,112 30,751 2,057,466 2,088,217 Commercial real estate91 149 0 27,424 27,664 2,178,094 2,205,758 
MultifamilyMultifamily0 0 0 445 445 385,460 385,905 
Nonowner occupiedNonowner occupied0 101 0 24,726 24,827 1,404,365 1,429,192 
Owner occupiedOwner occupied91 48 0 2,253 2,392 388,269 390,661 
Loans to individualsLoans to individuals1,986 902 725 247 3,860 786,611 790,471 Loans to individuals1,350 449 461 271 2,531 914,470 917,001 
Total$6,503 $2,645 $1,200 $40,762 $51,110 $6,524,730 $6,575,840 
Acquired loans
Commercial, financial, agricultural and other$38 $0 $0 $74 $112 $25,010 $25,122 
Real estate construction0 0 0 308 308 2,092 2,400 
Residential real estate397 459 0 1,262 2,118 206,953 209,071 
Commercial real estate0 136 0 233 369 126,725 127,094 
Loans to individuals34 47 49 11 141 10,048 10,189 
Total$469 $642 $49 $1,888 $3,048 $370,828 $373,876 
AutomobileAutomobile945 1322 66 214 1,547 827,603 829,150 
Consumer credit cardsConsumer credit cards38 23 120 0 181 10,653 10,834 
Consumer otherConsumer other367 104 275 57 803 76,214 77,017 
Total loansTotal loans$4,671 $1,224 $903 $46,200 $52,998 $6,687,537 $6,740,535 
2124
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 December 31, 2019
 30 - 59
days
past due		60 - 89
days
past
due		90 days
or
greater
and still
accruing		NonaccrualTotal past
due and
nonaccrual		CurrentTotal
 (dollars in thousands)
Originated loans
Commercial, financial, agricultural and other$391 $57 $140 $8,780 $9,368 $1,202,658 $1,212,026 
Real estate construction198 0 9 0 207 442,570 442,777 
Residential real estate3,757 749 736 6,646 11,888 1,403,920 1,415,808 
Commercial real estate227 114 0 6,609 6,950 1,951,396 1,958,346 
Loans to individuals4,070 1,020 931 307 6,328 679,088 685,416 
Total$8,643 $1,940 $1,816 $22,342 $34,741 $5,679,632 $5,714,373 
Acquired loans
Commercial, financial, agricultural and other$1 $0 $1 $74 $76 $29,751 $29,827 
Real estate construction0 0 0 0 0 6,262 6,262 
Residential real estate304 207 221 1,949 2,681 262,873 265,554 
Commercial real estate0 107 0 298 405 158,768 159,173 
Loans to individuals87 89 35 12 223 13,736 13,959 
Total$392 $403 $257 $2,333 $3,385 $471,390 $474,775 
 December 31, 2020
 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal
 (dollars in thousands)
Commercial, financial, agricultural and other$146 $62 $112 $3,317 $3,637 $1,552,349 $1,555,986 
Time and demand97 28 23 3,317 3,465 1,537,917 1,541,382 
Commercial credit cards49 134 89 0 172 14,432 14,604 
Real estate construction936 0 0 54 990 426,231 427,221 
Residential real estate3,883 1,492 769 6,824 12,968 1,737,624 1,750,592 
Residential first lien1,775 660 267 3,489 6,191 1,138,132 1,144,323 
Residential junior lien/home equity2,108 832 502 3,335 6,777 599,492 606,269 
Commercial real estate237 160 3 35,072 35,472 2,176,097 2,211,569 
Multifamily0 0 0 460 460 370,779 371,239 
Nonowner occupied18 104 0 31,822 31,944 1,389,207 1,421,151 
Owner occupied219 56 3 2,790 3,068 416,111 419,179 
Loans to individuals2,870 852 639 274 4,635 811,180 815,815 
Automobile2,090 1417 94 261 2,862 709,938 712,800 
Consumer credit cards52 39 123 0 214 12,146 12,360 
Consumer other728 396 422 13 1,559 89,096 90,655 
Total loans$8,072 $2,566 $1,523 $45,541 $57,702 $6,703,481 $6,761,183 
Nonaccrual Loans
The previous tables summarize nonaccrual loans by loan segment. The Company generally places loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain, when part of the principal balance has been charged off and no restructuring has occurred, or the loans reach a certain number of days past due. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
When a loan is placed on nonaccrual, the accrued unpaid interest receivable is reversed against interest income and all future payments received are applied as a reduction to the loan principal. Generally, the loan is returned to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer in doubt.
ImpairedNonperforming Loans
Management considers loans to be impairednonperforming 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. Determination of impairment is treated the same acrossNonperforming loans include nonaccrual loans and all loan categories.troubled debt restructured loans. When management identifies a loan as impaired,nonperforming, the impairmentcredit 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 the value of the impaired loan is less than the recorded investment in the loan, impairmenta credit loss is recognized through an allowance estimate or a charge-off to the allowance. Troubled debt restructuredallowance for credit losses.
When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of a nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.
At June 30, 2021, there were 0 nonperforming loans on accrual status are also considered to be impaired loans.held for sale. At December 31, 2020, there was one nonperforming loan totaling $13 thousand classified as held for sale. During the six months ended June 30, 2021, a $5.0 million nonperforming
25
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

relationship was transferred to held for sale and sold, resulting in a $0.4 million gain. During the six months ended June 30, 2020, there were 0 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 June 30, 2021 and December 31, 2020. 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.
 June 30, 2021December 31, 2020
 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$5,598 $14,230 $2,025 $2,725 
Time and demand5,598 14,230 2,025 2,725 
Real estate construction54 53 54 53 
Residential real estate10,029 12,207 10,939 13,258 
Residential first lien5,364 6,746 6,062 7,575 
Residential junior lien/home equity4,665 5,461 4,877 5,683 
Commercial real estate13,575 14,388 20,650 23,641 
Multifamily0 0 1 82 
Nonowner occupied11,134 11,621 16,786 19,459 
Owner occupied2,441 2,767 3,863 4,100 
Loans to individuals476 513 418 447 
Automobile419 452 405 430 
Consumer other57 61 13 17 
Subtotal29,732 41,391 34,086 40,124 
With an allowance recorded:
Commercial, financial, agricultural and other8,737 8,889 2,358 4,210 9,377 1,268 
Time and demand8,737 8,889 2,358 4,210 9,377 1,268 
Real estate construction0 0 0 0 0 0 
Residential real estate0 0 0 0 0 0 
Residential first lien0 0 0 0 0 0 
Residential junior lien/home equity0 0 0 0 0 0 
Commercial real estate14,324 15,850 588 15,757 15,830 3,638 
Multifamily445 463 113 459 470 116 
Nonowner occupied13,614 15,122 475 15,060 15,122 3,508 
Owner occupied265 265 0 238 238 14 
Loans to individuals0 0 0 0 0 0 
Automobile0 0 0 0 0 0 
Consumer other0 0 0 0 0 0 
Subtotal23,061 24,739 2,946 19,967 25,207 4,906 
Total$52,793 $66,130 $2,946 $54,053 $65,331 $4,906 

26
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 For the Six Months Ended June 30,
 20212020
Total LoansOriginated LoansAcquired Loans
 Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$3,966 $43 $6,894 $34 $74 $0 
Time and demand3,966 43 
Real estate construction54 0 0 0 0 0 
Residential real estate10,726 221 10,182 159 1,922 17 
Residential first lien5,822 176 
Residential junior lien/home equity4,904 45 
Commercial real estate15,879 30 14,367 67 238 0 
Multifamily0 0 
Nonowner occupied13,079 10 
Owner occupied2,800 20 
Loans to individuals477 6 457 6 11 0 
Automobile426 6 
Consumer other51 0 
Subtotal31,102 300 31,900 266 2,245 17 
With an allowance recorded:
Commercial, financial, agricultural and other6,813 36 1,881 1 0 0 
Time and demand6,813 36 
Real estate construction0 0 0 0 51 0 
Residential real estate0 0 290 0 0 0 
Residential first lien0 0 
Residential junior lien/home equity0 0 
Commercial real estate14,730 0 11,509 4 1,222 0 
Multifamily457 0 
Nonowner occupied14,096 0 
Owner occupied177 0 
Loans to individuals0 0 0 0 0 0 
Automobile0 0 
Consumer other0 0 
Subtotal21,543 36 13,680 5 1,273 0 
Total$52,645 $336 $45,580 $271 $3,518 $17 

27
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 June 30,
20212020
Total LoansOriginated LoansAcquired Loans
Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
Income
Recognized		Average
recorded
investment		Interest
Income
Recognized
(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$5,591 $31 $6,758 $12 $74 $0 
Time and demand5,591 31 
Real estate construction54 0 0 0 0 0 
Residential real estate10,560 1159 9,836 80 1,753 15 
Residential first lien5,661 132 
Residential junior lien/home equity4,899 27 
Commercial real estate13,689 7 17,411 48 246 0 
Multifamily0 0 
Nonowner occupied11,227 2 
Owner occupied2,462 5 
Loans to individuals475 4 468 4 11 0 
Automobile415 4 
Consumer other60 0 
Subtotal30,369 201 34,473 144 2,084 15 
With an allowance recorded:
Commercial, financial, agricultural and other8,791 119 2,028 0 0 0 
Time and demand8,791 19 
Real estate construction0 0 0 0 103 0 
Residential real estate0 10 254 0 0 0 
Residential first lien0 0 
Residential junior lien/home equity0 0 
Commercial real estate14,329 0 17,142 0 1,828 0 
Multifamily450 0 
Nonowner occupied13,614 0 
Owner occupied265 0 
Loans to individuals0 0 0 0 0 0 
Automobile0 0 
Consumer other0 0 
Subtotal23,120 19 19,424 0 1,931 0 
Total$53,489 $220 $53,897 $144 $4,015 $15 
Unfunded commitments related to nonperforming loans were $0.2 million at both June 30, 2021 and December 31, 2020. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required at June 30, 2021. At December 31, 2020, a reserve of $26 thousand was established for these off balance sheet exposures.
Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternatealternative financing sources.

 Troubled debt restructured loans are considered to be nonperforming loans.
In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. These modifications typically provide for the deferral of both principal and interest for 90 days. The CARES Act, along with a joint agency statement issued by banking regulators, provides that short-term modifications, meeting certain
2228
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

along with a joint agency statement issued by banking regulators, provides that short-term modifications, meeting certain criteria and in response to COVID-19, do not need to be accounted for as a troubled debt restructured loans. Additionally, short-term loan modifications that are not accounted for as a troubled debt restructured loan, in accordance with the CARES Act, would remain classified as current during the deferral period and therefore are not reflected in the past due loan tables provided on the prior page. During the first and second quartersAs of 2020, the Company granted approximately 6,500 short-term loan modifications to its customersJune 30, 2021, loans with an aggregate principal balances of $1.4 billion. Most of these deferrals were for a 90-day period, which expired during the second and third quarters. Additional 90-day payment deferrals were granted to 136 customers with aggregate principal balances of $244.1 million during the second and third quarters. As of September 30, 2020, the balance of loans$59.5 million were in deferral status had fallen to $65.4 million. It is likely that some customers that are no longer in the deferrala forbearance period will be granted an additional 90 day deferral in order to provide support for the continued impact of COVID-19. The decision to grant an additional forbearance will be credit driven and will be based on a complete evaluation of the customer's financial circumstances.
When the ultimate collectability of the total principal of an impaired 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 an impaired 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, 2020 and December 31, 2019, there were 0 impaired loans held for sale. During the nine months ended September 30, 2020, there were 0 gains recognized on the sale of impaired loans. During the nine months ended September 30, 2019, there were $0.4 million in gains recognized on the sale of impaired loans.
The following tables include the recorded investment and unpaid principal balance for impaired loans with the associated allowance amount, if applicable, as of September 30, 2020 and December 31, 2019. Also presented are the average recorded investment in impaired loans and the related amount of interest recognized while the loan was considered impaired. 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.
 September 30, 2020December 31, 2019
 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
 (dollars in thousands)
Originated loans:
With no related allowance recorded:
Commercial, financial, agricultural and other$795 $987 $1,848 $6,997 
Real estate construction54 53 0 0 
Residential real estate9,962 11,965 10,372 12,437 
Commercial real estate14,228 14,523 3,015 3,210 
Loans to individuals495 808 406 640 
Subtotal25,534 28,336 15,641 23,284 
With an allowance recorded:
Commercial, financial, agricultural and other4,750 12,778 $1,497 8,290 10,032 $1,580 
Real estate construction0 0 0 0 0 0 
Residential real estate0 0 0 474 498 1 
Commercial real estate17,389 17,442 5,921 5,293 5,308 851 
Loans to individuals0 0 0 0 0 0 
Subtotal22,139 30,220 7,418 14,057 15,838 2,432 
Total$47,673 $58,556 $7,418 $29,698 $39,122 $2,432 

23
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 September 30, 2020December 31, 2019
 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
 (dollars in thousands)
Acquired loans
With no related allowance recorded:
Commercial, financial, agricultural and other$74 $74 $73 $73 
Real estate construction308 308 0 0 
Residential real estate1,429 1,794 2,136 2,585 
Commercial real estate233 257 298 320 
Loans to individuals11 14 12 15 
Subtotal2,055 2,447 2,519 2,993 
With an allowance recorded:
Commercial, financial, agricultural and other0 0 $0 0 0 $0 
Real estate construction0 0 0 0 0 0 
Residential real estate0 0 0 0 0 0 
Commercial real estate0 0 0 0 0 0 
Loans to individuals0 0 0 0 0 0 
Subtotal0 0 0 0 0 0 
Total$2,055 $2,447 $0 $2,519 $2,993 $0 

 For the Nine Months Ended September 30,
 20202019
Originated LoansAcquired LoansOriginated LoansAcquired Loans
 Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$4,062 $15 $74 $0 $2,129 $10 $2,255 $0 
Real estate construction6 0 137 0 0 0 0 0 
Residential real estate10,380 235 1,772 18 10,751 280 1,966 6 
Commercial real estate13,994 90 1,453 76 3,854 129 636 18 
Loans to individuals469 9 11 0 356 11 14 0 
Subtotal28,911 349 3,447 94 17,090 430 4,871 24 
With an allowance recorded:
Commercial, financial, agricultural and other4,569 45 0 0 4,064 36 0 0 
Real estate construction0 0 0 0 0 0 0 0 
Residential real estate0 0 0 0 347 6 0 0 
Commercial real estate13,830 9 0 0 5,357 2 160 0 
Loans to individuals0 0 0 0 0 0 0 0 
Subtotal18,399 54 0 0 9,768 44 160 0 
Total$47,310 $403 $3,447 $94 $26,858 $474 $5,031 $24 

24
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,
20202019
Originated LoansAcquired LoansOriginated LoansAcquired Loans
Average
recorded
investment		Interest
Income
Recognized		Average
recorded
investment		Interest
Income
Recognized		Average
recorded
investment		Interest
Income
Recognized		Average
recorded
investment		Interest
Income
Recognized
(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$1,918 $10 $74 $0 $1,902 $3 $4,697 $0 
Real estate construction18 0 308 0 0 0 0 0 
Residential real estate10,198 72 1,473 1 10,254 86 1,950 1 
Commercial real estate14,312 23 1,440 76 3,582 28 666 0 
Loans to individuals494 3 11 0 389 4 13 0 
Subtotal26,940 108 3,306 77 16,127 121 7,326 1 
With an allowance recorded:
Commercial, financial, agricultural and other6,423 16 0 0 4,677 8 0 0 
Real estate construction0 0 0 0 0 0 0 0 
Residential real estate0 0 0 0 740 1 0 0 
Commercial real estate17,407 3 0 0 6,443 1 155 0 
Loans to individuals0 0 0 0 0 0 0 0 
Subtotal23,830 19 0 0 11,860 10 155 0 
Total$50,770 $127 $3,306 $77 $27,987 $131 $7,481 $1 
Unfunded commitments related to nonperforming loans were $0.1 million at September 30, 2020 and $1.7 million at December 31, 2019. After consideration of the requirements to draw and available collateral related to these commitments, a reserve of $23 thousand and $12 thousand was established for these off balance sheet exposures at September 30, 2020 and December 31, 2019, respectively.CARES Act.
The following table provides detail as to the total troubled debt restructured loans and total commitments outstanding on troubled debt restructured loans:
September 30, 2020December 31, 2019June 30, 2021December 31, 2020
(dollars in thousands) (dollars in thousands)
Troubled debt restructured loansTroubled debt restructured loansTroubled debt restructured loans
Accrual statusAccrual status$7,078 $7,542 Accrual status$6,593 $8,512 
Nonaccrual statusNonaccrual status4,511 6,037 Nonaccrual status23,981 14,740 
TotalTotal$11,589 $13,579 Total$30,574 $23,252 
CommitmentsCommitmentsCommitments
Letters of creditLetters of credit$60 $60 Letters of credit$60 $60 
Unused lines of creditUnused lines of credit21 163 Unused lines of credit12 11 
TotalTotal$81 $223 Total$72 $71 
2529
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide detail, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:
For the Nine Months Ended September 30, 2020 For the Six Months Ended June 30, 2021
 Type of Modification     Type of Modification   
Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve		 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other1 $0 $629 $0 $629 $625 $489 Commercial, financial, agricultural and other3 $6,373 $0 $6,596 $12,969 $10,167 $1,091 
Time and demandTime and demand3 6,373 0 6,596 12,969 10,167 1,091 
Residential real estateResidential real estate16 $0 $33 $844 $877 $729 $0 Residential real estate7 0 105 186 291 287 0 
Commercial real estate2 0 0 12 12 8 0 
Residential first lienResidential first lien6 0 105 172 277 274 0 
Residential junior lien/home equityResidential junior lien/home equity1 0 0 14 14 13 0 
Loans to individualsLoans to individuals14 0 114 149 263 245 0 Loans to individuals4 0 93 0 93 85 0 
AutomobileAutomobile4 0 93 0 93 85 0 
TotalTotal33 $0 $776 $1,005 $1,781 $1,607 $489 Total14 $6,373 $198 $6,782 $13,353 $10,539 $1,091 

For the Nine Months Ended September 30, 2019 For the Six Months Ended June 30, 2020
 Type of Modification     Type of Modification   
Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve		 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and other2 $0 $0 $156 $156 $157 $0 
Residential real estateResidential real estate14 17 149 842 1,008 933 1 Residential real estate4 0 0 264 264 256 0 
Commercial real estateCommercial real estate3 0 0 6,119 6,119 5,740 397 Commercial real estate2 0 0 12 12 9 0 
Loans to individualsLoans to individuals7 0 0 98 98 87 0 Loans to individuals10 0 71 124 195 186 0 
TotalTotal26 $17 $149 $7,215 $7,381 $6,917 $398 Total16 $0 $71 $400 $471 $451 $0 
The troubled debt restructurings included in the above tables are also included in the impairednonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, $766$198 thousand and $149$71 thousand, respectively, of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For both 20202021 and 20192020, the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.

30
 For the Three Months Ended September 30, 2020
  Type of Modification   
 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
 (dollars in thousands)
Commercial, financial, agricultural and other1 $0 $629 $0 $629 $625 $489 
Residential real estate12 $0 $33 $580 $613 $477 $0 
Loans to individuals4 0 43 24 67 63 0 
Total17 $0 $705 $604 $1,309 $1,165 $489 

26
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, 2019
  Type of Modification   
 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
 (dollars in thousands)
Commercial, financial, agricultural and other1 $0 $0 $95 $95 $96 $0 
Residential real estate3 $0 $32 $53 $85 $85 $0 
Loans to individuals2 0 0 37 37 34 0 
Total6 $0 $32 $185 $217 $215 $0 
The following tables provide detail, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:
 For the Three Months Ended June 30, 2021
 Type of Modification
Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
(dollars in thousands)
Commercial, financial, agricultural and other1 $0 $0 $6,596 $6,596 $3,916 $0 
Time and demand1 0 0 6,596 6,596 3,916 0 
Residential real estate4 0 0 172 172 169 0 
Residential first lien4 0 0 172 172 169 0 
Loans to individuals2 0 29 0 29 29 0 
Automobile2 0 29 0 29 29 0 
Total7 $0 $29 $6,768 $6,797 $4,114 $0 

 For the Three Months Ended June 30, 2020
  Type of Modification   
 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
 (dollars in thousands)
Residential real estate2 $0 $0 $146 $146 $142 $0 
Loans to individuals3 0 53 1 54 55 0 
Total5 $0 $53 $147 $200 $197 $0 

The troubled debt restructurings included in the above tables are also included in the impairednonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the threesix months ended SeptemberJune 30, 2021 and 2020, and 2019, $694$29 thousand and $32$53 thousand, respectively, of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For both 20202021 and 2019,2020 the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.
A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. The following table provides information related to loans that were restructured within the past twelve months and that were considered to be in default during the ninesix months ended SeptemberJune 30:
 20212020
 Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Residential real estate0 $0 1 $50 
Total0 $0 1 $50 
 20202019
 Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Residential real estate1 $50 3 $70 
Commercial real estate1 112 0 0 
Loans to individuals2 78 0 0 
Total4 $240 3 $70 
The following table provides information related to loans that were restructured within the past twelve months and that were considered to be in default during the three months ended SeptemberJune 30:
 20202019
 Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Residential real estate0 $0 2 $49 
Commercial real estate1 112 0 0 
Loans to individuals2 78 0 0 
Total3 $190 2 $49 

2731
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 20212020
 Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Residential real estate0 $0 1 $50 
Total0 $0 1 $50 
The following tables provide detail related to the allowance for credit losses:
 For the Six Months Ended June 30, 2021
Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other$17,187 $(4,456)$193 $8,542 $21,466 
Time and demand16,838 (4,338)188 8,410 21,098 
Commercial credit cards349 (118)5 132 368 
Real estate construction7,966 0 135 (3,816)4,285 
Residential real estate14,358 — (119)211 (1,517)12,933 
Residential first lien7,919 (36)182 (671)7,394 
Residential junior lien/home equity6,439 (83)29 (846)5,539 
Commercial real estate41,953 (1,557)40 (4,641)35,795 
Multifamily6,240 (1)0 (1,860)4,379 
Nonowner occupied28,414 (1,556)40 13 26,911 
Owner occupied7,299 — 0 0 (2,794)4,505 
Loans to individuals19,845 (2,472)828 4,358 22,559 
Automobile16,133 (1,068)575 3,658 19,298 
Consumer credit cards635 (247)42 98 528 
Consumer other3,077 (1,157)211 602 2,733 
Total loans$101,309 $(8,604)$1,407 $2,926 $97,038 
 For the Nine Months Ended September 30, 2020
 Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total
 (dollars in thousands)
Allowance for credit losses:
Originated loans:
Beginning balance$20,221 $2,558 $4,091 $19,731 $4,984 $51,585 
Charge-offs(5,166)0 (720)(2,415)(4,958)(13,259)
Recoveries161 26 274 154 702 1,317 
Provision (credit)9,936 924 4,607 23,132 8,087 46,686 
Ending balance25,152 3,508 8,252 40,602 8,815 86,329 
Acquired loans:
Beginning balance13 0 2 37 0 52 
Charge-offs— 0 (213)(2)(287)(502)
Recoveries28 0 38 0 10 76 
Provision (credit)295 0 173 1,607 277 2,352 
Ending balance336 0 0 1,642 0 1,978 
Total ending balance$25,488 $3,508 $8,252 $42,244 $8,815 $88,307 
Ending balance: individually evaluated for impairment$1,497 $0 $0 $5,921 $0 $7,418 
Ending balance: collectively evaluated for impairment23,991 3,508 8,252 36,323 8,815 80,889 
Loans:
Ending balance1,736,736 452,989 1,744,020 2,215,311 800,660 6,949,716 
Ending balance: individually evaluated for impairment5,048 308 1,226 30,387 0 36,969 
Ending balance: collectively evaluated for impairment1,731,688 452,681 1,742,794 2,184,924 800,660 6,912,747 
a) The provision expense(credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

2832
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, 2019
 Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total
 (dollars in thousands)
Allowance for credit losses:
Originated loans:
Beginning balance$19,235 $2,002 $3,934 $18,382 $4,033 $47,586 
Charge-offs(1,584)0 (617)(305)(4,049)(6,555)
Recoveries180 158 190 160 419 1,107 
Provision (credit)2,109 250 409 790 4,310 7,868 
Ending balance19,940 2,410 3,916 19,027 4,713 50,006 
Acquired loans:
Beginning balance139 0 35 4 0 178 
Charge-offs(601)0 (46)(1,376)(9)(2,032)
Recoveries53 0 46 0 14 113 
Provision (credit)416 0 (34)1,393 (5)1,770 
Ending balance7 0 1 21 0 29 
Total ending balance$19,947 $2,410 $3,917 $19,048 $4,713 $50,035 
Ending balance: individually evaluated for impairment$1,054 $0 $4 $488 $0 $1,546 
Ending balance: collectively evaluated for impairment18,893 2,410 3,913 18,560 4,713 48,489 
Loans:
Ending balance1,210,936 420,281 1,666,220 2,124,240 677,884 6,099,561 
Ending balance: individually evaluated for impairment10,417 0 4,102 10,825 0 25,344 
Ending balance: collectively evaluated for impairment1,200,519 420,281 1,662,118 2,113,415 677,884 6,074,217 
For the Six Months Ended June 30, 2021
Loans
Ending balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit lossesEnding balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other$21,466 $2,358 $19,108 $1,374,177 $13,688 $1,360,489 
Time and demand21,098 2,358 18,740 1,360,065 13,688 1,346,377 
Commercial credit cards368 0 368 14,112 0 14,112 
Real estate construction4,285 0 4,285 414,816 0 414,816 
Residential real estate12,933 0 12,933 1,828,783 541 1,828,242 
Residential first lien7,394 0 7,394 1,218,300 0 1,218,300 
Residential junior lien/home equity5,539 0 5,539 610,483 541 609,942 
Commercial real estate35,795 588 35,207 2,205,758 27,099 2,178,659 
Multifamily4,379 113 4,266 385,905 445 385,460 
Nonowner occupied26,911 475 26,436 1,429,192 24,624 1,404,568 
Owner occupied4,505 0 4,505 390,661 2,030 388,631 
Loans to individuals22,559 0 22,559 917,001 0 917,001 
Automobile19,298 0 19,298 829,150 0 829,150 
Consumer credit cards528 0 528 10,834 0 10,834 
Consumer other2,733 0 2,733 77,017 0 77,017 
Total loans$97,038 $2,946 $94,092 $6,740,535 $41,328 $6,699,207 

2933
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, 2020 For the Six Months Ended June 30, 2020
Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total
(dollars in thousands) (dollars in thousands)
Allowance for credit losses:Allowance for credit losses:Allowance for credit losses:
Originated loans:Originated loans:Originated loans:
Beginning balanceBeginning balance$24,812 $3,067 $9,239 $33,130 $9,334 $79,582 Beginning balance$20,221 $2,558 $4,091 $19,731 $4,984 $51,585 
Charge-offsCharge-offs(3,395)0 (161)0 (1,149)(4,705)Charge-offs(1,771)0 (559)(2,415)(3,809)(8,554)
RecoveriesRecoveries44 0 153 110 226 533 Recoveries117 26 121 44 476 784 
Provision (credit)Provision (credit)3,691 441 (979)7,362 404 10,919 Provision (credit)6,245 483 5,586 15,770 7,683 35,767 
Ending balanceEnding balance25,152 3,508 8,252 40,602 8,815 86,329 Ending balance24,812 3,067 9,239 33,130 9,334 79,582 
Acquired loans:Acquired loans:Acquired loans:
Beginning balanceBeginning balance332 171 0 1,356 0 1,859 Beginning balance13 0 2 37 0 52 
Charge-offsCharge-offs0 0 (122)0 (80)(202)Charge-offs0 0 (91)(2)(207)(300)
RecoveriesRecoveries13 0 13 0 2 28 Recoveries15 0 25 0 8 48 
Provision (credit)Provision (credit)(9)(171)109 286 78 293 Provision (credit)304 171 64 1,321 199 2,059 
Ending balanceEnding balance336 0 0 1,642 0 1,978 Ending balance332 171 0 1,356 0 1,859 
Total ending balanceTotal ending balance$25,488 $3,508 $8,252 $42,244 $8,815 $88,307 Total ending balance$25,144 $3,238 $9,239 $34,486 $9,334 $81,441 
Ending balance: individually evaluated for impairmentEnding balance: individually evaluated for impairment$958 $171 $0 $5,766 $0 $6,895 
Ending balance: collectively evaluated for impairmentEnding balance: collectively evaluated for impairment24,186 3,067 9,239 28,720 9,334 74,546 
Loans:Loans:
Ending balanceEnding balance1,773,099 416,329 1,723,288 2,224,710 784,649 6,922,075 
Ending balance: individually evaluated for impairmentEnding balance: individually evaluated for impairment3,336 308 1,498 32,537 0 37,679 
Ending balance: collectively evaluated for impairmentEnding balance: collectively evaluated for impairment1,769,763 416,021 1,721,790 2,192,173 784,649 6,884,396 


34
 For the Three Months Ended September 30, 2019
 Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total
 (dollars in thousands)
Allowance for credit losses:
Originated loans:
Beginning balance$20,678 $2,491 $4,133 $19,287 $4,407 $50,996 
Charge-offs(742)0 (383)(6)(1,571)(2,702)
Recoveries41 74 6 81 162 364 
Provision (credit)(37)(155)160 (335)1,715 1,348 
Ending balance19,940 2,410 3,916 19,027 4,713 50,006 
Acquired loans:
Beginning balance15 0 25 25 0 65 
Charge-offs(49)0 0 (1,376)(3)(1,428)
Recoveries21 0 11 0 0 32 
Provision (credit)20 0 (35)1,372 3 1,360 
Ending balance7 0 1 21 0 29 
Total ending balance$19,947 $2,410 $3,917 $19,048 $4,713 $50,035 


Note 9 Leases
On January 1, 2019, the Company adopted ASU 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842 using the transition option provided in ASU 2018-11, which provides for the modified retrospective approach. Under this approach, comparative periods were not restated and no cumulative effect adjustment to the opening balance of retained earnings was required.
30
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 June 30, 2021
Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other$21,801 $(3,887)$103 $3,449 $21,466 
Time and demand21,427 (3,878)99 3,450 21,098 
Commercial credit cards374 (9)4 (1)368 
Real estate construction4,021 0 135 129 4,285 
Residential real estate12,829 — (14)174 (56)12,933 
Residential first lien7,227 (13)159 21 7,394 
Residential junior lien/home equity5,602 (1)15 (77)5,539 
Commercial real estate37,668 (7)1 (1,867)35,795 
Multifamily4,251 0 0 128 4,379 
Nonowner occupied27,889 (7)1 (972)26,911 
Owner occupied5,528 — 0 0 (1,023)4,505 
Loans to individuals20,444 (931)499 2,547 22,559 
Automobile16,888 (388)394 2,404 19,298 
Consumer credit cards689 (79)25 (107)528 
Consumer other2,867 (464)80 250 2,733 
Total loans$96,763 $(4,839)$912 $4,202 $97,038 
a) The provision expense(credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.
 For the Three Months Ended June 30, 2020
 Commercial,
financial,
agricultural
and other		Real estate
construction		Residential
real estate		Commercial
real estate		Loans to
individuals		Total
 (dollars in thousands)
Allowance for credit losses:
Originated loans:
Beginning balance$27,378 $2,852 $7,724 $31,265 $8,268 $77,487 
Charge-offs(1,285)0 (7)(2,150)(1,326)(4,768)
Recoveries49 26 59 0 264 398 
Provision (credit)(1,330)189 1,463 4,015 2,128 6,465 
Ending balance24,812 3,067 9,239 33,130 9,334 79,582 
Acquired loans:
Beginning balance350 0 0 1,238 0 1,588 
Charge-offs0 0 (66)(1)(71)(138)
Recoveries2 0 12 0 1 15 
Provision (credit)(20)171 54 119 70 394 
Ending balance332 171 0 1,356 0 1,859 
Total ending balance$25,144 $3,238 $9,239 $34,486 $9,334 $81,441 

Note 8 Leases
First Commonwealth has elected to apply certain practical expedients provided under the standardASU 2016-02 "Leases" (Topic 842) including (i) to not apply the requirements in the new standard to short-term leases (ii) to not reassess the lease classification for any expired or existing lease (iii) to account for lease and non-lease components separately (iv) to not reassess initial direct costs for any existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, primarilyincluding 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.
Adoption of this standard resulted in the Company recognizing right of-use ("ROU") assets of $38.5 million
35
ITEM 1. Financial Statements and a lease liability of $41.8 million on January 1, 2019.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 ROUright of use ("ROU") assets and lease liabilities, lease costs and other lease information.
September 30, 2020December 31, 2019
Balance sheet:
Operating lease asset classified as premises and equipment$43,180 $48,642 
Operating lease liability classified as other liabilities47,791 52,894 
For the Three Months EndedFor the Nine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Income statement:
    Operating lease cost classified as occupancy and equipment expense$1,545 $1,275 $4,281 $3,959 
Weighted average lease term, in years15.1015.44
Weighted average discount rate3.42 %3.42 %
Operating cash flows$2,007 $3,351 
June 30, 2021December 31, 2020
Balance sheet:
Operating lease asset classified as premises and equipment$39,636 $42,617 
Operating lease liability classified as other liabilities43,854 46,819 
For the Three Months EndedFor the Six Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Income statement:
    Operating lease cost classified as occupancy and equipment expense$1,200 $1,368 $2,401 $2,736 
Weighted average lease term, in years14.6914.96
Weighted average discount rate3.41 %3.41 %
Operating cash flows$1,193 $1,325 
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.
In July 2020, the Company announced the consolidation of 29 branch locations, including 12 leased locations, into nearby offices prior to December 31, 2020. As a result, during the third quarter, the Company paid $0.7 million in lease termination fees and decreased the ROU asset and lease liability by $3.8 million and $3.6 million, respectively.
Future minimum payments for operating leases with initial or remaining terms of one year or more as of SeptemberJune 30, 20202021 were as follows (dollars in thousands):
For the twelve months ended:
SeptemberJune 30, 20212022$4,8234,595 
SeptemberJune 30, 202220234,6004,406 
SeptemberJune 30, 202320244,4904,240 
SeptemberJune 30, 202420254,4274,144 
SeptemberJune 30, 202520264,3123,702 
Thereafter39,75235,772 
Total future minimum lease payments62,40456,859 
Less remaining imputed interest14,61313,005 
Operating lease liability$47,79143,854 
31
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 109 Income Taxes
In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at SeptemberJune 30, 20202021 and December 31, 2019,2020, First Commonwealth had 0 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, 2017 are no longer open to examination by federal and state taxing authorities.
36
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1110 Fair Values of Assets and Liabilities
FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” 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,” 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 FASB ASC Topic 825; however, in the future we may elect to adopt this guidance for select financial instruments.
 
In accordance with FASB ASC 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 impairednonperforming 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 7,6, “Investment Securities.”
32
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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.
During the third quarter of 2020, the company announced the consolidation of 29 branch locations into nearby offices prior to December 31, 2020. As a result, 17 owned locations were moved to Also included in loans held for sale and are being carried at the lower of cost or fair value. Four of these locations are carried atcommercial loans for which fair value is determined byusing an independent market-based appraisal less estimated costs to sell, and are classified as Level 2.executed trade or market bid obtained from potential buyers.
Interest rate derivatives are reported at an estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities, and consist of interest rate swaps where there is no significant deterioration in the counterparties' and/or loan customers' credit risk since origination of the interest rate swap as well as interest rate caps, interest rate collars and risk participation agreements. First Commonwealth values its interest rate swap and cap positions using a yield curve by taking market prices/rates for an appropriate set of instruments. The set of instruments currently used to determine the U.S. Dollar yield curve includes cash LIBOR rates from overnight to one year, Eurodollar futures contracts and swap rates from one year to
37
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

thirty years. These yield curves determine the valuations of interest rate swaps. Interest rate derivatives are further described in Note 12,11, “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.
We also utilize this approach to estimate our own credit risk on derivative liability positions. In 2020, we have not realized any losses due to a counterparty's inability to pay any uncollateralized positions.
Interest rate derivatives also include interest rate forwards entered into to hedge residential mortgage loans held for sale and the related interest-rate lock commitments. This includes forward commitments to sell mortgage loans. The fair value of these derivative financial instruments are based on derivative market data inputs as of the valuation date and the underlying value of mortgage loans for rate lock commitments.
In addition, the Company hedges foreign currency risk through the use of foreign exchange forward contracts. The fair value of foreign exchange forward contracts is based on the differential between the contract price and the market-based forward rate.
The estimated fair value for other real estate owned included in Level 2 is determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement.
•Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker traded transactions. If the inputs used to provide the valuation are unobservable and/or there is very little, if any, market activity for the security or similar securities, the securities would be considered Level 3 securities. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The assets included in Level 3 are non-marketable equity investments, certain interest rate derivatives, certain other real estate owned and certain impairednonperforming 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).
3338
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with ASU No. 2011-4, 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 InputsRange /
(weighted average)
September 30, 2020
Other Investments$1,670 CarryingValueN/AN/A
Impaired Loans758  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$1.46 - $1.48 (b)
Oil per BBL/d$36.00 - $36.00 (b)
Limited Partnership Investments6,546 Par ValueN/AN/A
December 31, 2019
Other Investments$1,670 CarryingValueN/AN/A
Impaired Loans884  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$2.61 - $3.49 (b)
Oil per BBL/d$47.09 - $53.14 (b)
2,239 Discounted Cash FlowDiscount Rate$3.84 - $9.50
Limited Partnership Investments5,795 Par ValueN/AN/A
Fair Value (dollars
in thousands)		Valuation
Technique		Unobservable InputsRange /
(weighted average)
June 30, 2021
Other Investments$1,670 CarryingValueN/AN/A
Nonperforming Loans712  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$2.00 - $2.00 (b)
Oil per BBL/d$50.00 - $50.00 (b)
5,160  (a)Discounted Cash FlowDiscount Rate6.50%
Limited Partnership Investments7,448 Par ValueN/AN/A
December 31, 2020
Other Investments$1,670 CarryingValueN/AN/A
Nonperforming Loans798  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$1.46 - $1.48 (b)
Oil per BBL/d$36 - $36 (b)
Limited Partnership Investments6,619 Par ValueN/AN/A
 
(a)The remainder of impairednonperforming loans valued using Level 3 inputs are not included in this disclosure as the values of those loans are based on bankruptcy agreement documentation.
(b)Unobservable inputs are defined as follows: MMBTU - one million British thermal units; BBL/d - barrels per day.
The discount rate is the significant unobservable input used in the fair value measurement of impairednonperforming loans. Significant increases in this rate would result in a decrease in the estimated fair value of the loans, while a decrease in this rate would result in a higher fair value measurement. Other unobservable inputs in the fair value measurement of impairednonperforming loans relate to gas, oil and natural gas prices. Increases in these prices would result in an increase in the estimated fair value of the loans, while a decrease in these prices would result in a lower fair value measurement.
The tables below present the balances of assets and liabilities measured at fair value on a recurring basis:
 September 30, 2020
 Level 1Level 2Level 3Total
 (dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential$0 $7,541 $0 $7,541 
Mortgage-Backed Securities - Commercial0 218,552 0 218,552 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential0 543,543 0 543,543 
Other Government-Sponsored Enterprises0 100,993 0 100,993 
Obligations of States and Political Subdivisions0 13,167 0 13,167 
Corporate Securities0 24,440 0 24,440 
Total Securities Available for Sale0 908,236 0 908,236 
Other Investments0 11,296 1,670 12,966 
Loans Held for Sale0 37,998 0 37,998 
Premises and Equipment, net0 442 0 442 
Other Assets(a)
0 60,563 6,546 67,109 
Total Assets$0 $1,018,535 $8,216 $1,026,751 
Other Liabilities(a)
$0 $67,241 $0 $67,241 
Total Liabilities$0 $67,241 $0 $67,241 
 June 30, 2021
 Level 1Level 2Level 3Total
 (dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential$0 $6,327 $0 $6,327 
Mortgage-Backed Securities - Commercial0 330,468 0 330,468 
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential0 718,627 0 718,627 
Other Government-Sponsored Enterprises0 990 0 990 
Obligations of States and Political Subdivisions0 9,681 0 9,681 
Corporate Securities0 24,437 0 24,437 
Total Securities Available for Sale0 1,090,530 0 1,090,530 
Other Investments0 9,857 1,670 11,527 
Loans Held for Sale0 19,530 0 19,530 
Other Assets(a)
0 39,252 7,448 46,700 
Total Assets$0 $1,159,169 $9,118 $1,168,287 
Other Liabilities(a)
$0 $43,313 $0 $43,313 
Total Liabilities$0 $43,313 $0 $43,313 
(a)Hedging and non-hedging interest rate derivatives and limited partnership investments

3439
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019 December 31, 2020
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential$0 $8,341 $0 $8,341 Mortgage-Backed Securities - Residential$0 $7,230 $0 $7,230 
Mortgage-Backed Securities - CommercialMortgage-Backed Securities - Commercial0 189,133 0 189,133 Mortgage-Backed Securities - Commercial0 191,180 0 191,180 
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential0 661,947 0 661,947 Mortgage-Backed Securities - Residential0 496,033 0 496,033 
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises0 1,000 0 1,000 Other Government-Sponsored Enterprises0 100,998 0 100,998 
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions0 17,909 0 17,909 Obligations of States and Political Subdivisions0 11,397 0 11,397 
Corporate SecuritiesCorporate Securities0 23,962 0 23,962 Corporate Securities0 24,385 0 24,385 
Total Securities Available for SaleTotal Securities Available for Sale0 902,292 0 902,292 Total Securities Available for Sale0 831,223 0 831,223 
Other InvestmentsOther Investments0 15,091 1,670 16,761 Other Investments0 10,557 1,670 12,227 
Loans Held for SaleLoans Held for Sale0 15,989 0 15,989 Loans Held for Sale0 33,436 0 33,436 
Premises and Equipment, netPremises and Equipment, net0 442 0 442 
Other Assets(a)
Other Assets(a)
0 21,894 5,795 27,689 
Other Assets(a)
0 54,362 6,619 60,981 
Total AssetsTotal Assets$0 $955,266 $7,465 $962,731 Total Assets$0 $930,020 $8,289 $938,309 
Other Liabilities(a)
Other Liabilities(a)
$0 $21,469 $0 $21,469 
Other Liabilities(a)
$0 $61,308 $0 $61,308 
Total LiabilitiesTotal Liabilities$0 $21,469 $0 $21,469 Total Liabilities$0 $61,308 $0 $61,308 
(a)Hedging and non-hedging interest rate derivatives and limited partnership investments

For the ninesix months ended SeptemberJune 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
 2020
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $5,795 $7,465 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 751 751 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $6,546 $8,216 
 2021
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $6,620 $8,290 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 919 919 
Issuances0 0 0 
Sales0 0 0 
Settlements0 (91)(91)
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $7,448 $9,118 
3540
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 2019
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $2,696 $4,366 
Total gains or losses
Included in earnings0 198 198 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 1,237 1,237 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $4,131 $5,801 

 2020
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $5,795 $7,465 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 611 611 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $6,406 $8,076 
During the ninesix months ended SeptemberJune 30, 20202021 and 2019, there were 0 transfers between fair value Levels 1, 2 or 3. There were 0 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, 2020, and 2019.
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:
 2020
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $6,406 $8,076 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 140 140 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $6,546 $8,216 
36
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 2019
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $3,312 $4,982 
Total gains or losses
Included in earnings0 245 245 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 574 574 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $4,131 $5,801 
During the three months ended September 30, 2020 and 2019, 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 SeptemberJune 30, 2021 and 2020.
For the three months ended June 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
 2021
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $7,010 $8,680 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 529 529 
Issuances0 0 0 
Sales0 0 0 
Settlements0 (91)(91)
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $7,448 $9,118 
41
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 2020
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $6,223 $7,893 
Total gains or losses
Included in earnings0 0 0 
Included in other comprehensive income0 0 0 
Purchases, issuances, sales and settlements
Purchases0 183 183 
Issuances0 0 0 
Sales0 0 0 
Settlements0 0 0 
Transfers from Level 30 0 0 
Transfers into Level 30 0 0 
Balance, end of period$1,670 $6,406 $8,076 
During the three months ended June 30, 2021 and 2020, 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 June 30, 2021 and 2019.2020.
The tables below present the balances of assets measured at fair value on a nonrecurring basis at:
September 30, 2020 June 30, 2021
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Impaired loans$0 $28,793 $13,517 $42,310 
Nonperforming loansNonperforming loans$0 $32,510 $17,337 $49,847 
Other real estate ownedOther real estate owned0 1,183 0 1,183 Other real estate owned0 655 0 655 
Total AssetsTotal Assets$0 $29,976 $13,517 $43,493 Total Assets$0 $33,165 $17,337 $50,502 

December 31, 2019 December 31, 2020
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Impaired loans$0 $12,267 $17,518 $29,785 
Nonperforming loansNonperforming loans$0 $35,543 $13,604 $49,147 
Other real estate ownedOther real estate owned0 2,608 0 2,608 Other real estate owned0 1,319 0 1,319 
Total AssetsTotal Assets$0 $14,875 $17,518 $32,393 Total Assets$0 $36,862 $13,604 $50,466 
The following losses were realized on the assets measured on a nonrecurring basis:
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended June 30,For the Six Months Ended June 30,
2020201920202019 2021202020212020
(dollars in thousands) (dollars in thousands)
Impaired loans2$(3,695)$(954)$(9,940)$(2,606)
Nonperforming loansNonperforming loans$(2,527)$191 $(2,314)$(6,822)
Other real estate ownedOther real estate owned(4)(42)(4)(51)Other real estate owned0 (26)0 (76)
Total lossesTotal losses$(3,699)$(996)$(9,944)$(2,657)Total losses$(2,527)$165 $(2,314)$(6,898)
ImpairedNonperforming 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 impairednonperforming 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
42
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is performed to determine fair value for impairednonperforming 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 impairednonperforming loans with balances of $250 thousand and over. For real estate secured loans with balances under $250
2
37
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

thousand, we rely on broker price opinions. For non-real estate secured assets, the Company normally relies on third party valuations specific to the collateral type.
The fair value for other real estate owned, determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement, is classified as Level 2. The fair value for other real estate owned, determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of $1.1$0.4 million as of SeptemberJune 30, 20202021 and consists primarily of residential and commercial real estate properties in Pennsylvania. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.
Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 13,12, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the ninesix months ended SeptemberJune 30, 2020.2021.
FASB ASC 825-10, “Transition Related to FSP FAS 107-1” and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are as discussed above. The methodologies for other financial assets and financial liabilities are discussed below.
Cash and due from banks and interest-bearing bank deposits: The carrying amounts for cash and due from banks and interest-bearing bank deposits approximate the estimated fair values of such assets.
Securities: Fair values for securities available for sale and held to maturity are based on quoted market prices, if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of other investments, which includes FHLB stock and other equity investments, is considered a reasonable estimate of fair value.
Loans: The fair values of all loans are estimated by discounting the estimated future cash flows using interest rates currently offered for loans with similar terms to borrowers of similar credit quality adjusted for past due and nonperforming loans.
Loans held for sale: The estimated fair value of loans held for sale is based on market bids obtained from potential buyers.
Off-balance sheet instruments: Many of First Commonwealth’s off-balance sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. FASB ASC Topic 460, “Guarantees” clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The carrying amount and estimated fair value for standby letters of credit was $0.1 million at both SeptemberJune 30, 20202021 and December 31, 2019.2020. See Note 6,5, “Commitments and Contingent Liabilities,” for additional information.
Deposit liabilities: The estimated fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date because of the customers’ ability to withdraw funds immediately. The carrying value of variable rate time deposit accounts and certificates of deposit approximate their fair values at the report date. Also, fair values of fixed rate time deposits for both periods are estimated by discounting the future cash flows using interest rates currently being offered and a schedule of aggregated expected maturities.
Short-term borrowings: The fair values of borrowings from the FHLB were estimated based on the estimated incremental borrowing rate for similar type borrowings. The carrying amounts of other short-term borrowings, such as federal funds purchased and securities sold under agreement to repurchase, were used to approximate fair value due to the short-term nature of the borrowings.
43
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subordinated debt and long-term debt: The fair value is estimated by discounting the future cash flows using First Commonwealth’s estimate of the current market rate for similar types of borrowing arrangements.
38
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:
 June 30, 2021
  Fair Value Measurements Using:
 Carrying
Amount		TotalLevel 1Level 2Level 3
 (dollars in thousands)
Financial assets
Cash and due from banks$89,505 $89,505 $89,505 $0 $0 
Interest-bearing deposits194,948 194,948 194,948 0 0 
Securities available for sale1,090,530 1,090,530 0 1,090,530 0 
Securities held to maturity554,225 555,820 0 555,820 0 
Other investments11,527 11,527 0 9,857 1,670 
Loans held for sale19,530 19,530 0 19,530 0 
Loans6,740,535 7,117,132 0 32,510 7,084,622 
Financial liabilities
Deposits7,885,019 7,885,040 0 7,885,040 0 
Short-term borrowings107,372 106,922 0 106,922 0 
Subordinated debt170,694 174,902 0 0 174,902 
Long-term debt5,918 6,617 0 6,617 0 
Capital lease obligation6,155 6,155 0 6,155 0 
 September 30, 2020
  Fair Value Measurements Using:
 Carrying
Amount		TotalLevel 1Level 2Level 3
 (dollars in thousands)
Financial assets
Cash and due from banks$97,060 $97,060 $97,060 $0 $0 
Interest-bearing deposits283,037 283,037 283,037 0 0 
Securities available for sale908,236 908,236 0 908,236 0 
Securities held to maturity268,638 276,988 0 276,988 0 
Other investments12,966 12,966 0 11,296 1,670 
Loans held for sale37,998 37,998 0 37,998 0 
Loans6,949,716 7,391,037 0 28,793 7,362,244 
Financial liabilities
Deposits7,703,907 7,707,618 0 7,707,618 0 
Short-term borrowings122,356 121,828 0 121,828 0 
Subordinated debt170,572 164,565 0 0 164,565 
Long-term debt56,424 58,372 0 58,372 0 
Capital lease obligation6,494 6,494 0 6,494 0 

 December 31, 2019
  Fair Value Measurements Using:
 Carrying
Amount		TotalLevel 1Level 2Level 3
 (dollars in thousands)
Financial assets
Cash and due from banks$102,346 $102,346 $102,346 $0 $0 
Interest-bearing deposits19,510 19,510 19,510 0 0 
Securities available for sale902,292 902,292 0 902,292 0 
Securities held to maturity337,123 338,718 0 338,718 0 
Other investments16,761 16,761 0 15,091 1,670 
Loans held for sale15,989 15,989 0 15,989 0 
Loans6,189,148 6,393,872 0 12,267 6,381,605 
Financial liabilities
Deposits6,677,615 6,677,595 0 6,677,595 0 
Short-term borrowings201,853 201,151 0 201,151 0 
Subordinated debt170,450 171,772 0 0 171,772 
Long-term debt56,917 58,051 0 58,051 0 
Capital lease obligation6,815 6,815 0 6,815 0 

 December 31, 2020
  Fair Value Measurements Using:
 Carrying
Amount		TotalLevel 1Level 2Level 3
 (dollars in thousands)
Financial assets
Cash and due from banks$100,009 $100,009 $100,009 $0 $0 
Interest-bearing deposits256,572 256,572 256,572 0 0 
Securities available for sale831,223 831,223 0 831,223 0 
Securities held to maturity361,844 369,851 0 369,851 0 
Other investments12,227 12,227 0 10,557 1,670 
Loans held for sale33,436 33,436 0 33,436 0 
Loans6,761,183 7,202,763 0 35,543 7,167,220 
Financial liabilities
Deposits7,438,666 7,440,906 0 7,440,906 0 
Short-term borrowings117,373 117,037 0 117,037 0 
Subordinated debt170,612 165,665 0 0 165,665 
Long-term debt56,258 57,881 0 57,881 0 
Capital lease obligation6,385 6,385 0 6,385 0 
3944
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1211 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 3839 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 1415 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are the lead bank. The risk participation agreement provides credit protection to us should the borrower fail to perform on its interest rate derivative contract with us.
First Commonwealth is also party to interest rate caps and collars that are not designated as hedging instruments. The interest rate caps relate to contracts that First Commonwealth enters into with loan customers that provide a maximum interest rate on their variable rate loan. At the same time the interest rate cap is entered into with the customer, First Commonwealth enters into an offsetting interest rate cap with another financial institution. The notional amount and maximum interest rate on both interest cap contracts are identical. The interest rate collars relate to contracts that First Commonwealth enters into with loan customers that provides both a maximum and minimum interest rate on their variable rate loan. At the same time the interest rate collar is entered into with the customer, First Commonwealth enters into an offsetting interest rate collar with another financial institution. The notional amount and the maximum and minimum interest rates on both interest collar contracts are identical.
The fee received, less the estimate of the loss for the credit exposure, was recognized in earnings at the time of the transaction.
Derivatives Designated as Hedging Instruments
In August 2019, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts mature on August 15, 2024 and August 15, 2026 and have notional amounts of $30.0 million and $40.0 million, respectively. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments made on subordinated debentures benchmarked to the 3-month LIBOR rate. Therefore, the interest rate swaps convert the interest rate benchmark on the first $70.0 million of 3-month LIBOR based subordinated debentures to a fixed rate.
In May and June 2021, the Company entered into three interest rate swap contracts that were designated as cash flow hedges. The interest rate swaps have a total notional amount of $325.0 million; $25.0 million with an original maturity of three years, $150.0 million with an original maturity of four years and $150.0 million with an original maturity of five years. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments on commercial loans benchmarked to the 1-month LIBOR rate. Therefore, the interest rate swaps convert the interest payments on the first $325.0 million of 1-month LIBOR based commercial loans into fixed rate payments.
The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income. For the three and ninesix months ended SeptemberJune 30, 20202021 there was a positive impact of $69 thousand and a negative impact of $208 thousand and $219$157 thousand, 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 itemitems in the unaudited Consolidated Statements of Income as the income on the hedged items. The cash flow hedges were highly effective at SeptemberJune 30, 2020,2021, and changes in the fair value attributed to hedge ineffectiveness were not material.
45
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company also enters into interest rate lock commitments in conjunction with its mortgage origination business. These are commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Company locks the rate in with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. Loans under mandatory rate lock commitments are covered under forward sales contracts of mortgage-backed securities (“MBS”). Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in "Noninterest income" in the unaudited Consolidated Statements of Income. The impact to noninterest income for the three and ninesix months ended SeptemberJune 30, 20202021 was an increasea decrease of $0.3 and $1.5 million, respectively.
40
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$0.8 million.
Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. We determine the fair value of rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates and taking into consideration the probability that the rate lock commitments will close or will be funded. At SeptemberJune 30, 2020,2021, the underlying funded mortgage loan commitments had a carrying value of $21.2$14.5 million and a fair value of $24.5$16.4 million, while the underlying unfunded mortgage loan commitments had a notional amount of $49.1$40.0 million. At December 31, 2019,2020, the underlying funded mortgage loan commitments had a carrying value of $9.8$25.0 million and a fair value of $10.7$28.4 million, while the underlying unfunded mortgage loan commitments had a notional amount of $25.5$47.9 million. The interest rate lock commitments decreased noninterest income by $0.1 million and increased other noninterest income by $0.1$0.4 million for the three and ninesix months ended SeptemberJune 30, 2020, respectively.2021.
In addition, a small amount of interest income on loans is exposed to changes in foreign exchange rates. Several commercial borrowers have a portion of their operations outside of the United States and borrow funds on a short-term basis to fund those operations. In order to reduce the risk related to the translation of foreign denominated transactions into U.S. dollars, the Company enters into foreign exchange forward contracts. These contracts relate principally to the Euro and the Canadian dollar. The contracts are recorded at fair value with changes in fair value recorded in "Other operating expense" in the unaudited Consolidated Statements of Income. The increase in other noninterest expense for the three and ninesix months ended SeptemberJune 30, 20202021 totaled $3 thousand and $15$5 thousand, respectively. At SeptemberJune 30, 20202021 and December 31, 2019,2020, the underlying loans had a carrying value of $2.4$2.3 million and $4.8$2.1 million, respectively, and a fair value of $2.4$2.3 million and $4.8$2.1 million, respectively.

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, 2020December 31, 2019
 (dollars in thousands)
Derivatives not Designated as Hedging Instruments
Credit value adjustment$(2,394)$(272)
Notional amount:
Interest rate derivatives610,994 587,275 
Interest rate caps75,685 87,188 
Interest rate collars35,354 35,354 
Risk participation agreements228,853 164,632 
Sold credit protection on risk participation agreements(78,656)(69,011)
Interest rate options49,105 25,460 
Derivatives Designated as Hedging Instruments
Interest rate swaps:
Fair value adjustment(4,091)801 
Notional amount70,000 70,000 
Interest rate forwards:
Fair value adjustment(195)(63)
Notional amount42,000 30,000 
Foreign exchange forwards:
Fair value adjustment2 (41)
Notional amount2,362 4,789 
June 30, 2021December 31, 2020
 (dollars in thousands)
Derivatives not Designated as Hedging Instruments
Credit value adjustment$(1,639)$(2,792)
Notional amount:
Interest rate derivatives692,606 631,446 
Interest rate caps66,267 66,527 
Interest rate collars35,354 35,354 
Risk participation agreements227,943 220,280 
Sold credit protection on risk participation agreements(86,852)(78,522)
Interest rate options39,996 47,874 
Derivatives Designated as Hedging Instruments
Interest rate swaps:
Fair value adjustment(2,360)(3,665)
Notional amount395,000 70,000 
Interest rate forwards:
Fair value adjustment(82)(483)
Notional amount41,000 65,000 
Foreign exchange forwards:
Fair value adjustment20 (5)
Notional amount2,331 2,119 
 
4146
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The table below presents the change in the fair value of derivative assets and derivative liabilities attributable to credit risk or fair value changes included in "Other income," 'Other expense," "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
 (dollars in thousands)
Non-hedging interest rate derivatives
Increase (decrease) in other income$142 $(33)$(611)$420 
Increase in other expense0 0 0 0 
Hedging interest rate derivatives
Decrease in interest and fees on loans0 0 0 (118)
Increase (decrease) in interest from subordinated debentures208 (70)219 (70)
Increase in other expense0 0 0 7 
Hedging interest rate forwards
(Decrease) increase in other income(102)201 132 122 
Increase in other expense0 0 0 0 
Hedging foreign exchange forwards
Increase in other expense3 3 15 4 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2021202020212020
 (dollars in thousands)
Non-hedging interest rate derivatives
(Decrease) increase in other income$(27)$1,672 $309 $(753)
Hedging interest rate derivatives
Increase in interest from subordinated debentures236 66 462 11 
Hedging interest rate forwards
Increase (decrease) in other income641 (248)(401)234 
Hedging foreign exchange forwards
Increase in other expense3 8 5 12 
The fair value of our derivatives is included in a table in Note 11,10, “Fair Values of Assets and Liabilities,” in the line items
“Other assets” and “Other liabilities.”
Note 1312 Goodwill
FASB ASC Topic 350-20, “Intangibles – Goodwill and Other” requires an annual valuation of the fair value of a reporting unit that has goodwill and a comparison of the fair value to the book value of equity to determine whether the goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.
We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill as both of SeptemberJune 30, 20202021 and December 31, 20192020 was $303.3 million. NaN impairment charges on goodwill or other intangible assets were incurred in 20202021 or 2019.2020.
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 a result of the COVID-19 pandemic and its impact on the Company's stock price as well as the potential impact on future earnings, Management evaluated whether a triggering event had occurred asJune 30, 2021, no indicators of September 30, 2020. The evaluation concluded that it was more likely than not that First Commonwealth's fair value exceeded its book value and therefore there was no triggering event. However,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.

4247
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1413 Subordinated Debentures
Subordinated debentures outstanding are as follows:
  September 30, 2020December 31, 2019
 DueAmountRateAmountRate
  (dollars in thousands)
Owed to:
First Commonwealth Bank2028$49,291 4.875% until June 1, 2023, then LIBOR + 1.845%$49,222 4.875% until June 1, 2023, then LIBOR + 1.845%
First Commonwealth Bank203349,114 5.50% until June 1, 2028, then LIBOR + 2.37%49,061 5.50% until June 1, 2028, then LIBOR + 2.37%
First Commonwealth Capital Trust II203430,929 LIBOR + 2.85%30,929 LIBOR + 2.85%
First Commonwealth Capital Trust III203441,238 LIBOR + 2.85%41,238 LIBOR + 2.85%
Total$170,572 $170,450 
  June 30, 2021December 31, 2020
 DueAmountRateAmountRate
  (dollars in thousands)
Owed to:
First Commonwealth Bank2028$49,361 4.875% until June 1, 2023, then LIBOR + 1.845%$49,314 4.875% until June 1, 2023, then LIBOR + 1.845%
First Commonwealth Bank203349,166 5.50% until June 1, 2028, then LIBOR + 2.37%49,131 5.50% until June 1, 2028, then LIBOR + 2.37%
First Commonwealth Capital Trust II203430,929 LIBOR + 2.85%30,929 LIBOR + 2.85%
First Commonwealth Capital Trust III203441,238 LIBOR + 2.85%41,238 LIBOR + 2.85%
Total$170,694 $170,612 
On May 21, 2018, First Commonwealth issued ten-year subordinated notes with an aggregate principal amount of $50.0 million and a fixed-to-floating rate of 4.875%. The rate remains fixed until June 1, 2023, then adjusts on a quarterly basis to LIBOR + 1.845%. The Bank may redeem the notes, beginning with the interest payment due on June 1, 2023, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. Deferred issuance costs of $0.9 million are being amortized on a straight-line basis over the term of the notes.
On May 21, 2018, First Commonwealth issued fifteen-year subordinated notes with an aggregate principal amount of $50.0 million and a fixed-to-floating rate of 5.50%. The rate remains fixed until June 1, 2028, then adjusts on a quarterly basis to LIBOR + 2.37%. The Bank may redeem the notes, beginning with the interest payment due on June 1, 2028, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. Deferred issuance costs of $1.1 million are being amortized on a straight-line basis over the term of the notes.
First Commonwealth currently has two trusts, First Commonwealth Capital Trust II and First Commonwealth Capital Trust III, of which 100% of the common equity is owned by First Commonwealth. The trusts were formed for the purpose of issuing company obligated mandatorily redeemable capital securities to third-party investors and investing the proceeds from the sale of the capital securities solely in junior subordinated debt securities (“subordinated debentures”) of First Commonwealth. The subordinated debentures held by each trust are the sole assets of the trust.
Interest on the debentures issued to First Commonwealth Capital Trust III is paid quarterly at a floating rate of LIBOR + 2.85% which is reset quarterly. Subject to regulatory approval, First Commonwealth may redeem the debentures, in whole or in part, at its option on any interest payment date at a redemption price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest to the date of the redemption. Deferred issuance costs of $0.6 million are being amortized on a straight-line basis over the term of the securities.
Interest on the debentures issued to First Commonwealth Capital Trust II is paid quarterly at a floating rate of LIBOR + 2.85%, which is reset quarterly. Subject to regulatory approval, First Commonwealth may redeem the debentures, in whole or in part, at its option at a redemption price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest to the date of the redemption. Deferred issuance costs of $0.5 million are being amortized on a straight-line basis over the term of the securities.
In order to reduce its exposure to variability in expected future cash flows related to interest payments on First Commonwealth Capital Trust II and III, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts fix the interest rate on Capital Trust II at 1.515% until August 15, 2024 and the rate on Capital Trust III at 1.525% until August 15, 2026. Additional information related to these cash flow hedges can be found in Note 15 Revenue Recognition11- "Derivatives".

On January 1, 2018, the Company adopted ASU No. 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, First Commonwealth will generally be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.


4348
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The implementation of the new standard did not have a material impact on the measurement or recognition of revenue, therefore a cumulative effect adjustment to opening retained earnings was not necessary.Note 14 Revenue Recognition

In connection withSubstantially all of the adoption of Topic 606, First Commonwealth is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, for example, sales commission. The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

The Company also evaluated whether it has any significant contract balances. A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration resulting in a contract receivable or before payment is due resulting in a contract asset. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the Company has already received payment from the customer. First Commonwealth’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as trust income which is based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation andCompany’s revenue is recognized. The Company does not typically enter into long-term revenuegenerated from contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2020 and December 31, 2019, the Company did not have any significant contract balances.

Topic 606 does not apply to revenuecustomers. Revenue associated with financial instruments, including revenue from loans and securities. In addition,securities, certain noninterest income streams such as fees associated with derivatives are not in scope of the new guidance. TopicASC 606 - Revenue from Contracts with Customers. ASC 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. The recognitionFor contracts within the scope of ASC 606, the Company immediately expenses contract acquisition costs when the asset that would have resulted from capitalizing these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers.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.

44
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
49
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

not control the services rendered to the customers, retail brokerage fees are presented net of related costs, including $2.2$0.9 million and $2.3$0.8 million in commission expense as of SeptemberJune 30, 20202021 and 2019,2020, 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 related gain(loss) on sale if a significant financing component is present.

45
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,
 2020201920202019
 (dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income$2,554 $2,325 $6,774 $6,221 
Service charges on deposit accounts4,035 4,954 12,066 13,792 
Insurance and retail brokerage commissions2,156 1,912 5,982 5,887 
Card-related interchange income6,441 5,629 17,589 15,800 
Gain on sale of other loans and assets520 181 853 861 
Other income945 937 2,713 2,789 
Noninterest Income (in-scope of Topic 606)16,651 15,938 45,977 45,350 
Noninterest Income (out-of-scope of Topic 606)10,118 6,241 21,877 17,607 
Total Noninterest Income$26,769 $22,179 $67,854 $62,957 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2021202020212020
 (dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income$2,706 $2,109 $5,222 $4,220 
Service charges on deposit accounts4,310 3,286 8,357 8,031 
Insurance and retail brokerage commissions1,978 1,831 4,150 3,826 
Card-related interchange income7,406 5,886 13,833 11,148 
Gain on sale of other loans and assets337 173 506 332 
Other income1,103 824 2,083 1,768 
Noninterest Income (in-scope of Topic 606)17,840 14,109 34,151 29,325 
Noninterest Income (out-of-scope of Topic 606)8,246 7,703 19,290 11,760 
Total Noninterest Income$26,086 $21,812 $53,441 $41,085 
4650
Table of Contents


ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, 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 report that are not historical facts may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, 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” as well. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate” or words of similar meaning. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including uncertainties regarding the impact of the COVID-19 pandemic, and could be affected by many factors, including, but not limited to: (1) the length and extent of the economic contraction as a resultimpact of the COVID-19 pandemic and the impact of such contraction on First Commonwealth and its customers; (2) volatility and disruption in national and international financial markets; (3) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; (4) inflation, interest rate, commodity price, securities market and monetary fluctuations; (5) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which First Commonwealth or its customers must comply; (6) the soundness of other financial institutions; (7) political instability; (8) impairment of First Commonwealth’s goodwill or other intangible assets; (9) acts of God or of war or terrorism; (10) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (11) changes in consumer spending, borrowings and savings habits; (12) changes in the financial performance and/or condition of First Commonwealth’s borrowers; (13) technological changes; (14) acquisitions and integration of acquired businesses; (15) First Commonwealth’s ability to attract and retain qualified employees; (16) changes in the competitive environment in First Commonwealth’s markets and among banking organizations and other financial service providers; (17) the ability to increase market share and control expenses; (18) 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; (19) the reliability of First Commonwealth’s vendors, internal control systems or information systems; (20) 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; and (21) other risks and uncertainties described in this report and in the other reports that we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. Further, statements about the potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, clients, third parties and us.
In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements in this report. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Explanation of Use of Non-GAAP Financial Measure
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-
4751
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


they facilitate comparison with the performance of others in the financial services industry. Although we believe that these non-GAAPGAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.
We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on page 51pages 55 and page 5863 for the ninesix and three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
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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



Selected Financial Data
The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which follows, and with the unaudited Consolidated Financial Statements and related notes. 
For the Three Months Ended September 30,For the Nine Months Ended September 30,For the Three Months Ended June 30,For the Six Months Ended June 30,
20202019202020192021202020212020
(dollars in thousands, except per share data)(dollars in thousands, except per share data)
Net IncomeNet Income$19,186 $26,644 $47,764 $78,513 Net Income$29,619 $23,851 $69,389 $28,578 
Per Share Data:Per Share Data:Per Share Data:
Per Share Data: Basic Earnings per SharePer Share Data: Basic Earnings per Share$0.20 $0.27 $0.49 $0.80 Per Share Data: Basic Earnings per Share$0.31 $0.24 $0.72 $0.29 
Diluted Earnings per Share Diluted Earnings per Share0.20 0.27 0.49 0.80  Diluted Earnings per Share0.31 0.24 0.72 0.29 
Cash Dividends Declared per Common ShareCash Dividends Declared per Common Share0.11 0.10 0.33 0.30 Cash Dividends Declared per Common Share0.12 0.11 0.23 0.22 
Average Balance:Average Balance:Average Balance:
Total assetsTotal assets$9,389,965 $8,050,052 $8,925,315 $7,972,438 Total assets$9,451,683 $9,043,554 $9,291,956 $8,690,437 
Total equityTotal equity1,088,101 1,033,903 1,077,030 1,010,227 Total equity1,098,094 1,071,549 1,087,384 1,071,433 
End of Period Balance:End of Period Balance:End of Period Balance:
Net loans (1)
Net loans (1)
$6,899,407 $6,069,814 
Net loans (1)
$6,663,027 $6,871,043 
Total assetsTotal assets9,289,366 8,152,027 Total assets9,402,402 9,364,655 
Total depositsTotal deposits7,703,907 6,677,996 Total deposits7,885,019 7,782,201 
Total equityTotal equity1,072,831 1,039,030 Total equity1,106,419 1,075,705 
Key Ratios:Key Ratios:Key Ratios:
Return on average assetsReturn on average assets0.81 %1.31 %0.71 %1.32 %Return on average assets1.26 %1.06 %1.51 %0.66 %
Return on average equityReturn on average equity7.01 %10.22 %5.92 %10.39 %Return on average equity10.82 %8.95 %12.87 %5.36 %
Dividends payout ratioDividends payout ratio55.00 %37.04 %67.35 %37.50 %Dividends payout ratio38.71 %45.83 %31.94 %75.86 %
Average equity to average assets ratioAverage equity to average assets ratio11.59 %12.84 %12.07 %12.67 %Average equity to average assets ratio11.62 %11.85 %11.70 %12.33 %
Net interest marginNet interest margin3.11 %3.76 %3.34 %3.75 %Net interest margin3.17 %3.29 %3.29 %3.46 %
Net loans to deposits ratioNet loans to deposits ratio89.56 %90.89 %Net loans to deposits ratio84.50 %88.29 %
(1) Includes loans held for sale.

Results of Operations
NineSix Months Ended SeptemberJune 30, 20202021 Compared to NineSix Months Ended SeptemberJune 30, 20192020
Net Income
For the ninesix months ended SeptemberJune 30, 2020,2021, First Commonwealth had net income of $47.8$69.4 million, or $0.49$0.72 diluted earnings per share, compared to net income of $78.5$28.6 million, or $0.80$0.29 diluted earnings per share, in the ninesix months ended SeptemberJune 30, 2019.2020. The declineincrease in net income was primarily the result of $49.0a $1.0 million provision for credit losses recognized during the six months ended June 30, 2021 compared to $37.8 million recognized in order to provide for estimated probable losses relatedthe same period in 2020. Additionally, noninterest income increased $12.4 million during the six months ended June 30, 2021 compared to the COVID-19 pandemic. This wassame period in 2020. These increases were partially offset by a $8.5$11.2 million decreaseincrease in the income tax provision due to lowerhigher income before income taxes.
For the ninesix months ended SeptemberJune 30, 2020,2021, the Company’s return on average equity was 5.92%12.87% and its return on average assets was 0.71%1.51%, compared to 10.39%5.36% and 1.32%0.66%, respectively, for the ninesix months ended SeptemberJune 30, 2019.2020.
Net Interest Income
Net interest income, on a fully taxable equivalent basis, was $201.9$138.2 million in the first ninesix months of 2020,2021, compared to $202.4$135.2 million for the same period in 2019. Despite growth2020. The increase in average interest-earning assets of $869.4 million, net interest income declined because of a lower interest rate environment in 2020, which resulted incan be attributed to a 41 basis point decrease in the net interest margin,cost of interest-bearing liabilities offset by a 48 basis point decrease in the yield on interest-earning assets and a fully taxable equivalent basis.$634.8 million increase in interest-earning assets. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 74.7% and 76.2% for the nine months ended September 30, 2020 and 2019, respectively.
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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


before provision expense plus noninterest income), at 72.0% and 76.6% for the six months ended June 30, 2021 and 2020, respectively.
The net interest margin on a fully taxable equivalent basis was 3.34%3.29% and 3.75%3.46% for the ninesix months ended SeptemberJune 30, 20202021 and SeptemberJune 30, 2019,2020, respectively. The decline in the net interest margin is primarily attributable to the lower level of interest rates largely offset byand the amount and composition of interest-earning assets and interest-bearing liabilities.
 
The taxable equivalent yield on interest-earning assets was 3.79%3.49% for the ninesix months ended SeptemberJune 30, 2020,2021, a decrease of 7648 basis points compared to the 4.55%3.97% yield for the same period in 2019.2020. This decrease is primarilylargely due to a decline in the loan portfolio yield, which decreased by 7834 basis points when compared to the ninesix months ended SeptemberJune 30, 2019.2020. Contributing to this decreasedecline was the yield on our adjustable and variable rate commercial loan portfolio, which declined 9778 basis points as a result of the Federal Reserve decreasingReserve's decrease of short-term interest rates.rates in March 2020. During the first quarter of 2020, the Federal Reserve decreased the Federal Funds target rate by 150 basis points in addition to the 75 basis point rate decreases made during 2019. Although the impact of the 2020 rate decreases are not fully reflected in the comparison of the periods presented, such decreases in rates have the effect of lowering yields on variable and adjustable rate loans, as well as, to a lesser extent, the cost of interest-bearing liabilities, and any additional rate decreases would be expected to have a similar effect.points.

The loan yield for the ninesix months ended SeptemberJune 30, 2020,2021, was impacted by $573.5$459.5 million in average PPP loans outstanding during the period. These loans were originated under the CARES Act whichand have a stated loan rate of 1% and a yield of 2.69%5.89% for the six months ended June 30, 2021. During the six months ended June 30, 2020, PPP loans averaged $202.9 million with a yield of 2.7%. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $4.0 million.$11.2 million for the six months ended June 30, 2021. These amounts are recognized in interest income as a yield adjustment over the life of the loan.loan with accelerated recognition when a loan is forgiven or paid off. As of SeptemberJune 30, 2020,2021, we expect to recognize additional PPP relatedPPP-related deferred processing fees, net of origination costs, of approximately $14.8$12.3 million as an adjustment to yield over the remaining terms of the loans. The balance of PPP loans outstanding at June 30, 2021 totaled $292.4 million. PPP loans increased the average balance ofyield on total loans by $327.0 million during the nine months ended September 30, 2020 decreasing the yield on loans by 814 basis points and the net interest margin by 315 basis points.points during the six months ended June 30, 2021. During the six months ended June 30, 2021, the Company originated $255.8 million in new PPP loans and processed forgiveness on $438.5 million of PPP loans originated in prior quarters.

The investment portfolio yield decreased 4952 basis points in comparison to the prior year primarily due the decrease in the Federal Reserveas a result of lower short-term interest rates. Investment portfolio purchases during the ninesix months ended SeptemberJune 30, 20202021 have been primarily in obligations of U.S. government agencies, obligations of other government-sponsored enterprises and obligations of states and political subdivisions with durations of approximately 4four to 11five years. Additionally, as a result of excess liquidity caused by significant growth in deposits during 2020,the past year, the average balance of interest bearinginterest-bearing deposits with banks, primarily represented by deposits placed with the Federal Reserve, has increased from $5.6$86.8 million in 20192020 to $173.1$349.7 million in 2020.2021. The impact of the level and rate paid on interest bearinginterest-bearing deposits with banks decreasesdecreased the yield on earning assets by 814 basis points for the ninesix months ended SeptemberJune 30, 2020.2021.
Decreases in the cost of interest-bearing liabilities partially offset the negative impact of lower yields on interest-earning assets. The cost of interest-bearing liabilities decreased to 0.64%0.31% for the ninesix months ended SeptemberJune 30, 2020,2021, from 1.08%0.72% for the same period in 2019, primarily due to a decrease in the cost of short-term borrowings and the cost of interest-bearing deposits as well as the cost of long-term debt.2020. Deposit growth due to the retention of PPP loan proceeds and the deposit of Federal stimulus checks as well as deposits acquired in our third quarter 2019 acquisition of Santander branches, combined to contribute to a decline in average short-term borrowings of $343.3$40.0 million for the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019. Decreases in the Federal Funds target rate impacted the cost of long-term debt, decreasing the cost by 56 basis points.2020. Lower market interest rates and management's efforts to reduce deposit costs resulted in the cost of interest-bearing deposits decreasing 4341 basis points and short-term borrowings decreasing 16071 basis points in comparison to the same period last year.
For the ninesix months ended SeptemberJune 30, 2020,2021, changes in interest rates negatively impacted net interest income by $35.3$6.1 million when compared with the same period in 2019.2020. The lower yield on interest-earning assets negatively impacted net interest income by $48.5$15.4 million, while the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $13.2$9.2 million.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $34.8$9.2 million for the ninesix months ended SeptemberJune 30, 2020,2021, as compared to the same period in 2019.2020. Higher levels of interest-earning assets resulted in an increase of $31.9$7.0 million in interest income, and changes in the volume and mix of interest-bearing liabilities decreased interest expense by $2.9$2.2 million, primarily due to a decrease in short-term borrowings.time deposits. Average earning assets for the ninesix months ended SeptemberJune 30, 20202021 increased $869.4$634.8 million, or 12.1%8.1%, compared to the same period in 2019.2020. Average loans for the comparable period increased $735.4$259.7 million, or 12.4%4.0%.
Net interest income also benefited from a $551.6$657.1 million increase in average net free funds at SeptemberJune 30, 20202021 as compared to SeptemberJune 30, 2019.2020. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of $522.5$606.3 million, or 34.7%31.8%, in noninterest-bearing demand deposit average balances, primarily due to deposit growth related to PPP loan proceeds as well as $86.6 million in deposits attributed to the Santander branch acquisition completed in the third quarter of 2019. Average time deposits for the nine months ended September 30, 2020 decreased by
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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


$100.6growth related to PPP loan proceeds and government stimulus payments. Average time deposits for the six months ended June 30, 2021 decreased by $308.2 million compared to the comparable period in 2019,2020, while the average rate paid on time deposits decreased 1996 basis points compared to the same period in 2019.2020.
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 ninesix months ended SeptemberJune 30:
20202019
 (dollars in thousands)
Interest income per Consolidated Statements of Income$227,903 $244,226 
Adjustment to fully taxable equivalent basis1,129 1,341 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)229,032 245,567 
Interest expense27,124 43,169 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$201,908 $202,398 
20212020
 (dollars in thousands)
Interest income per Consolidated Statements of Income$146,112 $154,310 
Adjustment to fully taxable equivalent basis598 755 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)146,710 155,065 
Interest expense8,471 19,900 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$138,239 $135,165 


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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


The following is an analysis of the average balance sheets and net interest income on a fully taxable equivalent basis for the ninesix months ended SeptemberJune 30:
 20202019
 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$173,058 $163 0.13 %$5,591 $181 4.33 %
Tax-free investment securities47,197 1,075 3.04 67,158 1,557 3.10 
Taxable investment securities1,187,354 19,600 2.20 1,200,845 24,290 2.70 
Loans, net of unearned income (b)(c)(e)6,670,819 208,194 4.17 5,935,427 219,539 4.95 
Total interest-earning assets8,078,428 229,032 3.79 7,209,021 245,567 4.55 
Noninterest-earning assets:
Cash98,345 91,954 
Allowance for credit losses(72,256)(51,192)
Other assets820,798 722,655 
Total noninterest-earning assets846,887 763,417 
Total Assets$8,925,315 $7,972,438 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)$1,534,147 $1,702 0.15 %$1,272,065 $5,511 0.58 %
Savings deposits (d)3,000,925 8,494 0.38 2,524,703 10,906 0.58 
Time deposits766,106 8,560 1.49 866,746 10,881 1.68 
Short-term borrowings146,270 670 0.61 489,562 8,075 2.21 
Long-term debt233,818 7,698 4.40 210,353 7,796 4.96 
Total interest-bearing liabilities5,681,266 27,124 0.64 5,363,429 43,169 1.08 
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)2,030,364 1,507,826 
Other liabilities136,655 90,956 
Shareholders’ equity1,077,030 1,010,227 
Total Noninterest-Bearing Funding Sources3,244,049 2,609,009 
Total Liabilities and Shareholders’ Equity$8,925,315 $7,972,438 
Net Interest Income and Net Yield on Interest-Earning Assets$201,908 3.34 %$202,398 3.75 %
 20212020
 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$349,747 $167 0.10 %$86,804 $69 0.16 %
Tax-free investment securities29,539 402 2.74 47,950 737 3.09 
Taxable investment securities1,329,843 11,947 1.81 1,199,233 13,843 2.32 
Loans, net of unearned income (b)(c)
6,776,560 134,194 3.99 6,516,854 140,416 4.33 
Total interest-earning assets8,485,689 146,710 3.49 7,850,841 155,065 3.97 
Noninterest-earning assets:
Cash92,243 97,129 
Allowance for credit losses(104,239)(66,705)
Other assets818,263 809,172 
Total noninterest-earning assets806,267 839,596 
Total Assets$9,291,956 $8,690,437 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)
$1,503,501 $220 0.03 %$1,465,901 $1,469 0.20 %
Savings deposits (d)
3,228,379 1,750 0.11 2,925,862 6,354 0.44 
Time deposits493,259 1,515 0.62 801,429 6,312 1.58 
Short-term borrowings117,155 58 0.10 157,188 635 0.81 
Long-term debt219,731 4,928 4.52 233,934 5,130 4.41 
Total interest-bearing liabilities5,562,025 8,471 0.31 5,584,314 19,900 0.72 
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits2,509,818 1,903,568 
Other liabilities132,729 131,122 
Shareholders’ equity1,087,384 1,071,433 
Total Noninterest-Bearing Funding Sources3,729,931 3,106,123 
Total Liabilities and Shareholders’ Equity$9,291,956 $8,690,437 
Net Interest Income and Net Yield on Interest-Earning Assets$138,239 3.29 %$135,165 3.46 %
(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 ninesix months ended SeptemberJune 30, 20202021 and 2019.2020.
(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.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.
(e)Includes held for sale loans.

 
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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


The following table shows the effect of changes in volumes and rates on interest income and interest expense for the ninesix months ended SeptemberJune 30, 20202021 compared with SeptemberJune 30, 2019:2020:
 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$(18)$5,424 $(5,442)
Tax-free investment securities(482)(463)(19)
Taxable investment securities(4,690)(272)(4,418)
Loans(11,345)27,227 (38,572)
Total interest income (b)(16,535)31,916 (48,451)
Interest-bearing liabilities:
Interest-bearing demand deposits(3,809)1,137 (4,946)
Savings deposits(2,412)2,066 (4,478)
Time deposits(2,321)(1,265)(1,056)
Short-term borrowings(7,405)(5,674)(1,731)
Long-term debt(98)871 (969)
Total interest expense(16,045)(2,865)(13,180)
Net interest income$(490)$34,781 $(35,271)
 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$98 $209 $(111)
Tax-free investment securities(335)(283)(52)
Taxable investment securities(1,896)1,507 (3,403)
Loans(6,222)5,592 (11,814)
Total interest income (b)(8,355)7,025 (15,380)
Interest-bearing liabilities:
Interest-bearing demand deposits(1,249)37 (1,286)
Savings deposits(4,604)662 (5,266)
Time deposits(4,797)(2,421)(2,376)
Short-term borrowings(577)(161)(416)
Long-term debt(202)(311)109 
Total interest expense(11,429)(2,194)(9,235)
Net interest income$3,074 $9,219 $(6,145)
 
(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 probableexpected losses inherent in the loan portfolio after giving consideration to charge-offs and recoveries for the period.on off-balance sheet commitments. The provision for credit losses is an amount added to the allowance, against which credit losses are charged.
The table below provides a breakout of the provision for credit losses by loan category for the nine months ended September 30: 
 20202019
 DollarsPercentageDollarsPercentage
 (dollars in thousands)
Commercial, financial, agricultural and other$10,231 21 %$2,525 26 %
Real estate construction924 2 250 2 
Residential real estate4,780 10 375 4 
Commercial real estate24,739 50 2,183 23 
Loans to individuals8,364 17 4,305 45 
Total$49,038 100 %$9,638 100 %
The provision for credit losses for the nine months ended September 30, 2020 increased in comparison to the nine months ended September 30, 2019 by $39.4 million. The level of provision expense in the first nine months of 2020 is primarily to build the allowance for loan loss in order to provide for estimated credit risks related to the COVID-19 pandemic. Contributing to the higher provision in nine months ended September 30, 2020 was $5.7 million in specific reserves related to loans for four commercial real estate borrowers that were placed on nonaccrual status during the first nine months of 2020. Additionally, $27.9 million of the provision expense is attributable to higher qualitative reserves due to the uncertain economic environment, additional risks related to accrued interest on loan forbearances and the large volume of consumer forbearances, and consideration of the estimated probable losses incurred in certain loan categories that may be affected by COVID-19, such as hospitality and retail. Additional qualitative reserves resulted in provision expense of $4.6 million for commercial, financial, agricultural loans, $4.1 million for residential real estate loans, $15.2 million for commercial real estate loans and $3.0 million for loans to individuals. Net charge-offs during the first nine months of 2020 totaled $12.4 million.
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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


The table below provides a breakout of the provision for credit losses by loan category for the six months ended June 30:
 20212020
 DollarsPercentageDollarsPercentage
 (dollars in thousands)
Commercial, financial, agricultural and other$8,542 292 %$6,549 17 %
Time and demand8,410 287 
Commercial credit cards132 5 
Real estate construction(3,816)(130)654 2 
Residential real estate(1,517)(52)5,650 15 
Residential first lien(671)(23)
Residential junior lien/home equity(846)(29)
Commercial real estate(4,641)(159)17,091 45 
Multifamily(1,860)(64)
Nonowner occupied13 — 
Owner occupied(2,794)(95)
Loans to individuals4,358 149 7,882 21 
Automobile3,658 125 
Consumer credit cards98 3 
Consumer other602 21 
Provision for credit losses on loans$2,926 100 %$37,826 100 %
Provision for off-balance sheet credit exposure(1,903)— 
       Total provision for credit losses$1,023 $37,826 
The provision for credit losses on loans for the six months ended June 30, 2021 decreased in comparison to the six months ended June 30, 2020 by $34.9 million. The level of provision expense in the six months ended June 30, 2021 is primarily the result of an improved economic forecast, which reflects a decline in the impact of the COVID-19 pandemic on the economy and expected loan losses. The provision for credit losses on loans was also impacted by a decrease of $3.9 million in reserves on individually analyzed loans. The total provision for credit losses was impacted by a $1.9 million decrease in expense due to a decline in reserves for off-balance sheet commitments.
Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. As previously indicated, an improved economic forecast provided for a lower level of allowance for credit losses and therefore resulted in $1.0 million in provision expense for the six months ended June 30, 2021. Two loan categories, commercial, financial, agricultural and other loans as well as Loans to Individuals, reflected provision expense during the six month period of 2021. The provision expense for Commercial, financial, agricultural and other loans was primarily due to net charge-offs and an increase in qualitative reserves. Provision expense for Loans to Individuals can be attributed to loan growth in that category as well as net charge-offs.
The level of provision expense in the first ninesix months of 20192020 was primarily a result of $7.4to build the allowance for loan loss in order to provide for credit losses related to the COVID-19 pandemic. Contributing to the higher provision during the six months ended June 30, 2020 was $5.9 million in net charge-offs, growth inspecific reserves for four commercial real estate borrowers that were placed on nonaccrual status during the loan portfolio and an increase infirst six months of 2020. Additionally, $22.3 million of the provision expense was attributable to higher qualitative reserves as a resultdue the uncertain economic environment resulting from COVID-19. Net charge-offs during the first six months of a higher probability of slightly less favorable economic conditions.2020 totaled $8.0 million.
The allowance for credit losses was $88.3$97.0 million, or 1.27%1.44%, of total loans outstanding and 1.34% of total originated loans outstanding at SeptemberJune 30, 2020,2021, compared to $51.6$101.3 million, or 0.83%1.50%, and 0.90%, respectively, at December 31, 20192020 and $50.0$81.4 million, or 0.82%1.18%, and 0.90%, respectively, at SeptemberJune 30, 2019.2020. Nonperforming loans as a percentage of total loans increaseddecreased to 0.71%0.78% at SeptemberJune 30, 20202021 from 0.52%0.80% at December 31, 20192020 and 0.58%0.81% as of SeptemberJune 30, 2019.2020. The allowance to nonperforming loan ratio was 177.58%183.81%, 160.28%187.43% and 141.64%145.37% as of SeptemberJune 30, 2021, December 31, 2020 and June 30, 2020, December 31, 2019 and September 30, 2019, 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 June 30, 2021.
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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


Below is an analysis of the consolidated allowance for credit losses for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 and the year-ended December 31, 2019:
September 30, 2020September 30, 2019December 31, 2019
 (dollars in thousands)
Balance, beginning of period$51,637 $47,764 $47,764 
Loans charged off:
Commercial, financial, agricultural and other5,166 2,185 3,393 
Real estate construction— — — 
Residential real estate933 663 1,042 
Commercial real estate2,417 1,681 2,008 
Loans to individuals5,245 4,058 5,831 
Total loans charged off13,761 8,587 12,274 
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other189 233 326 
Real estate construction26 158 158 
Residential real estate312 236 315 
Commercial real estate154 160 189 
Loans to individuals712 433 626 
Total recoveries1,393 1,220 1,614 
Net credit losses12,368 7,367 10,660 
Provision charged to expense49,038 9,638 14,533 
Balance, end of period$88,307 $50,035 $51,637 
2020:

June 30, 2021June 30, 2020December 31, 2020
 (dollars in thousands)
Balance, beginning of period$101,309 $51,637 $51,637 
Adoption of accounting standard - ASU 2016-13(1)
— — 13,393 
Loans charged off:
Commercial, financial, agricultural and other4,456 1,771 6,318 
Real estate construction— — — 
Residential real estate119 650 1,040 
Commercial real estate1,557 2,417 4,939 
Loans to individuals2,472 4,016 6,953 
Total loans charged off8,604 8,854 19,250 
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other193 132 314 
Real estate construction135 26 26 
Residential real estate211 146 414 
Commercial real estate40 44 312 
Loans to individuals828 484 991 
Total recoveries1,407 832 2,057 
Net charge-offs7,197 8,022 17,193 
Provision for credit losses on loans charged to expense2,926 37,826 53,472 
Balance, end of period$97,038 $81,441 $101,309 
Net charge-offs as a percentage of average loans outstanding (annualized)0.21 %0.25 %0.26 %
Allowance for credit losses as a percentage of end-of-period loans outstanding1.44 %1.18 %1.50 %
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans1.50 %1.28 %1.61 %
(1) CECL was adopted on December 31, 2020 in accordance with relief provided under the CARES Act.
5459
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 ninesix months ended SeptemberJune 30: 
20202019$ Change% Change20212020$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Income:Noninterest Income:Noninterest Income:
Trust incomeTrust income$6,774 $6,221 $553 9 %Trust income$5,222 $4,220 $1,002 24 %
Service charges on deposit accountsService charges on deposit accounts12,066 13,792 (1,726)(13)Service charges on deposit accounts8,357 8,031 326 4 
Insurance and retail brokerage commissionsInsurance and retail brokerage commissions5,982 5,887 95 2 Insurance and retail brokerage commissions4,150 3,826 324 8 
Income from bank owned life insuranceIncome from bank owned life insurance4,963 4,408 555 13 Income from bank owned life insurance3,460 3,416 44 1 
Card-related interchange incomeCard-related interchange income17,589 15,800 1,789 11 Card-related interchange income13,833 11,148 2,685 24 
Swap fee incomeSwap fee income864 1,634 (770)(47)Swap fee income1,398 823 575 70 
Other incomeOther income5,314 5,356 (42)(1)Other income3,921 3,487 434 12 
SubtotalSubtotal53,552 53,098 454 1 Subtotal40,341 34,951 5,390 15 
Net securities gainsNet securities gains47 15 32 213 Net securities gains16 27 (11)(41)
Gain on sale of mortgage loansGain on sale of mortgage loans13,226 6,101 7,125 117 Gain on sale of mortgage loans8,130 6,789 1,341 20 
Gain on sale of other loans and assetsGain on sale of other loans and assets3,151 3,831 (680)(18)Gain on sale of other loans and assets3,801 1,280 2,521 197 
Derivatives mark to marketDerivatives mark to market(2,122)(88)(2,034)2,311 Derivatives mark to market1,153 (1,962)3,115 (159)
Total noninterest incomeTotal noninterest income$67,854 $62,957 $4,897 8 %Total noninterest income$53,441 $41,085 $12,356 30 %
Total noninterest income, excluding net securities gains, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market for the ninesix months ended SeptemberJune 30, 20202021 increased $0.5$5.4 million, or 1%15%, compared to the ninesix months ended SeptemberJune 30, 2019.2020. Card-related interchange income increased $1.8$2.7 million due to growth in customer accounts and transactions, including $1.4transactions. Trust income increased $1.0 million attributable to accounts acquired in the Santander branch acquisition in the third quarter of 2019. Service charges on deposit accounts decreased $1.7 million, despite a $0.7 million increase attributable to the Santander branch acquisition. The lower level of service charge on deposit accounts isas a result of customers maintaining higher deposit balancesgrowth in assets under management, and swap fee income increased $0.6 million due to CARES Act stimulus and lower consumer spending during the second and third quarters of 2020.growth in interest rate swaps entered into for our commercial customers.
Total noninterest income increased $4.9$12.4 million, or 8%30%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a $7.1$3.1 million increase in gain on sale of mortgage loans as a result of growth in our mortgage lending area. Thethe mark to market adjustment on interest rate swaps entered into for our commercial customers resulted in a decrease of $2.0 million in noninterest income compared to the prior year period.customers. This adjustment does not reflect a realized lossgain on the swaps, but rather relates to changechanges in fair value due to movements in corporate bond spreads and swap rates. The gain on sale of other loans and assets decreased $0.7increased $2.5 million due to a lowerhigher volume of loans, primarily SBA loans, being sold in the first ninesix months of 20202021 compared to the same period in 2019.2020. Gain on sale of mortgage loans increased $1.3 million as a result of growth in our mortgage lending area.
5560
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 ninesix months ended SeptemberJune 30: 
20202019$ Change% Change
 (dollars in thousands)
Noninterest Expense:
Salaries and employee benefits$87,573 $83,205 $4,368 5 %
Net occupancy13,979 13,878 101 1 
Furniture and equipment11,468 11,396 72 1 
Data processing7,804 7,988 (184)(2)
Advertising and promotion3,800 3,611 189 5 
Pennsylvania shares tax3,246 3,365 (119)(4)
Intangible amortization2,792 2,364 428 18 
Other professional fees and services2,755 2,755 — — 
FDIC insurance1,637 1,164 473 41 
Other operating18,351 20,696 (2,345)(11)
Subtotal153,405 150,422 2,983 2 
Loss on sale or write-down of assets416 1,398 (982)(70)
Merger and acquisition related— 3,772 (3,772)(100)
COVID-19 related567 — 567 — 
Voluntary early retirement3,304 — 3,304 — 
Branch consolidation2,544 — 2,544 — 
Litigation and operational losses1,038 1,264 (226)(18)
Total noninterest expense$161,274 $156,856 $4,418 3 %

20212020$ Change% Change
 (dollars in thousands)
Noninterest Expense:
Salaries and employee benefits$57,018 $58,750 $(1,732)(3)%
Net occupancy8,654 9,370 (716)(8)
Furniture and equipment7,814 7,435 379 5 
Data processing6,244 5,063 1,181 23 
Advertising and promotion2,679 2,685 (6)— 
Pennsylvania shares tax2,090 1,992 98 5 
Intangible amortization1,729 1,853 (124)(7)
Other professional fees and services1,842 1,818 24 1 
FDIC insurance1,134 761 373 49 
Other operating12,786 11,796 990 8 
Subtotal101,990 101,523 467 — 
Loss on sale or write-down of assets52 353 (301)(85)
COVID-19 related306 442 (136)(31)
Branch consolidation18 — 18 — 
Litigation and operational losses1,035 709 326 46 
Total noninterest expense$103,401 $103,027 $374 — %
Noninterest expense increased $4.4$0.4 million, or 3%0.4%, for the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in 2019.2020. Contributing to the higher expensesincrease in 2020expense in 2021 is a $4.4$1.2 million increase in salaries and employee benefits asdata processing expense related to updates to our digital banking product offerings. Other operating expenses increased $1.0 million due to a result of a higher number of full-time equivalent employees, annual merit increases and a $2.3$1.7 million increasecredit in hospitalization expense. The higher number of employees is primarilyunfunded commitment expense recognized in 2020, with no similar credit in 2021. As a result of the acquisitionadoption of 14 branches from Santander in September 2019 and continued expansion of our mortgage and commercial banking businesses. The Santander acquisition accounted for $2.3 million ofCECL, the salaries and employee benefits increase. Partially offsetting these increases in salaries and employee benefit expense was the deferral of $0.6 million in salary and benefit costs related to the origination of approximately 4,900 PPP loans during the second quarter of 2020. Included in the Other operating line in the table above is a $0.9 million decrease in unfunded commitment expense. This decreaseexpense is a resultnow recorded as part of updates made in the first quarter of 2020 to the probability of default and loss given default information incorporated into the calculation.provision for credit losses. FDIC insurance increased $0.5$0.4 million in comparison to the prior period as a result of a $0.6 million assessment credit received in 2020 due growthto the FDIC deposit insurance fund reaching the required minimum reserve ratio. There was no similar credit in our deposits. Loss on sale or write-down of assets decreased $1.02021. Partially offsetting these increases is a $1.7 million decrease in salaries and employee benefits primarily due to a $0.5 million write-down on an OREO propertydecrease in full-time equivalent employees from 1,465 at June 30, 2020 to 1,392 at June 30, 2021. Additionally, net occupancy expense decreased $0.7 million. These decreases are largely attributable to the consolidation of 20% of the Bank’s branch facilities in the first nine months of 2019 with no similar activity in the current year.

Also increasing noninterest expense for the nine months ended September, 30, 2020 is $3.3 million related to the voluntary early retirement program and $2.5 million related to the branch consolidation initiative, both of which were announced during the thirdfourth quarter of 2020. The early retirement program was offered to all eligible employees who will reach age 60 or above as of December 31, 2020. Approximately 72 employees elected to participate in the early retirement program resulting in the recognition of $2.9 million in severance and $0.4 million in hospitalization expense. The branch consolidation initiative includes combining 29 of the Company's retail locations into nearby offices by December 31, 2020 and the related expenses include writedowns of $1.4 million on owned properties and leasehold improvements and $0.7 million in lease termination expense. Offsetting these is a $3.8 million decrease in merger and acquisition expenses with the completion of the Santander acquisition in the third quarter of 2019 with no similar activity in 2020.
56
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Income Tax
The provision for income taxes decreased $8.5increased $11.2 million or 44.5%, for the ninesix months ended SeptemberJune 30, 2020,2021, compared to the corresponding period in 2019.  The effective tax rate decreased 140 basis points, or 7.2%, primarily due to a $39.2 million decrease in income before income taxes offset by a $0.6 million increase in tax-free income from bank owned life insurance.2020. 
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 ninesix months ended SeptemberJune 30, 20202021 and 2019.2020.
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 ownedbank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an annual effective tax rate of 18.1%19.9% and 19.5%17.5% for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
As of SeptemberJune 30, 2020,2021, our deferred tax assets totaled $18.3$21.8 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved forecasts, evaluation of historical earning levels and consideration of potential tax strategies. If future events differ from our current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.
61
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 SeptemberJune 30, 20202021 Compared to Three Months Ended SeptemberJune 30, 20192020
Net Income
For the three months ended SeptemberJune 30, 2020,2021, First Commonwealth recognized net income of $19.2$29.6 million, or $0.20$0.31 diluted earnings per share, compared to net income of $26.6$23.9 million, or $0.27$0.24 diluted earnings per share, in the three months ended SeptemberJune 30, 2019.2020. The decreaseincrease in net income was primarily the result of a $8.5$4.3 million increase in noninterest income. Other items contributing to the growth in net income include a $1.5 million increase in net interest income and a $1.4 million decrease in the provision for credit losses, and a $2.1 million decrease net interest income.losses.
For the three months ended SeptemberJune 30, 2020,2021, the Company’s return on average equity was 7.01%10.82% and its return on average assets was 0.81%1.26%, compared to 10.22%8.95% and 1.31%1.06%, respectively, for the three months ended SeptemberJune 30, 2019.2020.
Net Interest Income
Net interest income, on a fully taxable equivalent basis, was $66.7$68.5 million in the thirdsecond quarter of 2020,2021, compared to $68.9$67.0 million for the same period in 2019.2020. This decrease resulted despiteincrease was the result of $0.5 billion of growth in average interest-earning assets. However, the positive impact of $1.3 billionthis growth in average interest-earning assets, which was more than offset by the impact of lower interest rates, thatwhich contributed to a 6512 basis points decrease in the net interest margin. Net interest income comprises the majority of our operating revenue (net(i.e. net interest income before provision expense plus noninterest income), at 71.3%72.3% and 75.5%75.4% for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
The net interest margin, on a fully taxable equivalent basis, was 3.11%3.17% and 3.76%3.29% for the three months ended SeptemberJune 30, 20202021 and SeptemberJune 30, 2019,2020, respectively. The decrease in the net interest margin is attributable to both changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.
 
The taxable equivalent yield on interest-earning assets was 3.45%3.35% for the three months ended SeptemberJune 30, 2020,2021, a decrease of 10835 basis points compared to the 4.53%3.70% yield for the same period in 2019.2020. This is largely due to a decrease in the loan portfolio yield, which declined by 10617 basis points when compared to the three months ended SeptemberJune 30, 2019. Contributing to this was a decrease in the Federal Funds target rate of 181 basis points in comparison to September 30, 2019.  While not fully reflected in the comparison of the periods presented, such decreases in rates have the effect of lowering yields on variable and adjustable rate loans, as well as, to a lesser extent, the cost of interest-bearing liabilities, and any additional rate decreases would be expected to have a similar effect.2020. Also impacting the yield on loans was PPP loans originated under the CARES Act, which have a stated rate of 1% and a yield of 2.7%5.1%. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $2.4$4.2 million. These loans increased the average balance of loans by $572.4$429.9 million for the thirdsecond quarter of 20202021, causing an 11a 9 basis point decreaseincrease in the yield on loans and a 310 basis point decreaseincrease in the net interest margin. The yield on the investment portfolio decreased 5750 basis points in comparison to the prior year.
The cost of interest-bearing liabilities decreased to 0.49%0.27% for the three months ended SeptemberJune 30, 2020,2021, from 1.05%0.59% for the same period in 2019,2020, primarily due to a decrease in the cost of interest-bearing deposits and short-term borrowings and the cost of interest-bearing deposits.
57
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Deposits acquired from the 3rd quarter 2019 acquisition of Santander branches as well as the portion of PPP loan proceeds still remaining in customers' deposit accounts contributed to a decline in average short-term borrowings of $198.4 million for the three months ended September 30, 2020 compared to the same period in 2019.borrowings. Lower market interest rates resulted in the cost of interest-bearing demand deposits decreasing 553 basis points and short-term borrowings decreasing 1888 basis points in comparison to the same period last year. Lower interest rates also impacted theThe cost of long-term debt decreasingincreased by 24 basis points due to the cost by 14 basis points.maturity of borrowings with lower interest rates.
For the three months ended SeptemberJune 30, 2020,2021, changes in interest rates negatively impacted net interest income by $17.0$1.3 million when compared with the same period in 2019.2020. The lower yield on interest-earning assets negatively impacted net interest income by $23.6$4.5 million, while the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $6.5$3.2 million.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $14.9$2.7 million in the three months ended SeptemberJune 30, 2020,2021, as compared to the same period in 2019.2020. Higher levels of interest-earning assets resulted in an increase of $14.5$1.5 million in interest income while changes in the volume and mix of interest-bearing liabilities decreased interest expense by $0.4$1.2 million. Average interest-earning assets for the three months ended SeptemberJune 30, 20202021 increased $1,259.6$467.7 million, or 17.3%5.7%, compared to the same period in 2019.2020. Average loans for the comparable period increased $932.6decreased $6.2 million, or 15.4%0.1%. Loans acquired with of the Santander branch acquisition contributed $26.1 million to the increase in average loans during the third quarter 2019.
Net interest income also benefited from a $740.8$520.1 million increase in average net free funds at SeptemberJune 30, 20202021 as compared to SeptemberJune 30, 2019.2020. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of $720.7$473.9 million, or 46.2%22.2%, in noninterest-bearing demand deposit average balances. Average time deposits for the three months ended SeptemberJune 30, 20202021 decreased by $167.5$318.3 million at lower costs compared to the comparable period in 2019,2020, decreasing interest expense by $0.8$1.2 million.
62
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the three months ended SeptemberJune 30:
20202019
 (dollars in thousands)
Interest income per Consolidated Statements of Income$73,593 $82,575 
Adjustment to fully taxable equivalent basis373 430 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)73,966 83,005 
Interest expense7,224 14,130 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$66,742 $68,875 
20212020
 (dollars in thousands)
Interest income per Consolidated Statements of Income$72,051 $74,981 
Adjustment to fully taxable equivalent basis290 359 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)72,341 75,340 
Interest expense3,852 8,295 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$68,489 $67,045 


5863
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 SeptemberJune 30:
 20202019
 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$343,689 $94 0.11 %$9,033 $81 3.56 %
Tax-free investment securities45,706 338 2.94 65,463 504 3.05 
Taxable investment securities1,163,857 5,757 1.97 1,151,774 7,382 2.54 
Loans, net of unearned income (b)(c)(e)6,975,402 67,777 3.87 6,042,822 75,038 4.93 
Total interest-earning assets8,528,654 73,966 3.45 7,269,092 83,005 4.53 
Noninterest-earning assets:
Cash100,751 93,740 
Allowance for credit losses(83,237)(52,593)
Other assets843,797 739,813 
Total noninterest-earning assets861,311 780,960 
Total Assets$9,389,965 $8,050,052 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)$1,669,157 $234 0.06 %$1,357,281 $2,092 0.61 %
Savings deposits (d)3,149,419 2,139 0.27 2,575,810 3,950 0.61 
Time deposits696,227 2,248 1.28 863,714 3,804 1.75 
Short-term borrowings124,670 35 0.11 323,041 1,620 1.99 
Long-term debt233,588 2,568 4.37 234,497 2,664 4.51 
Total interest-bearing liabilities5,873,061 7,224 0.49 5,354,343 14,130 1.05 
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)2,281,200 1,560,478 
Other liabilities147,603 101,328 
Shareholders’ equity1,088,101 1,033,903 
Total noninterest-bearing funding sources3,516,904 2,695,709 
Total Liabilities and Shareholders’ Equity$9,389,965 $8,050,052 
Net Interest Income and Net Yield on Interest-Earning Assets$66,742 3.11 %$68,875 3.76 %
 20212020
 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$358,595 $90 0.10 %$166,282 $32 0.08 %
Tax-free investment securities29,385 195 2.66 44,171 338 3.08 
Taxable investment securities1,498,204 6,440 1.72 1,201,822 6,606 2.21 
Loans, net of unearned income (b)(c)6,771,722 65,616 3.89 6,777,883 68,364 4.06 
Total interest-earning assets8,657,906 72,341 3.35 8,190,158 75,340 3.70 
Noninterest-earning assets:
Cash93,627 94,223 
Allowance for credit losses(102,303)(80,717)
Other assets802,453 839,890 
Total noninterest-earning assets793,777 853,396 
Total Assets$9,451,683 $9,043,554 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand deposits (d)$1,560,713 $112 0.03 %$1,573,595 $254 0.06 %
Savings deposits (d)3,297,818 779 0.09 2,994,607 2,507 0.34 
Time deposits458,638 541 0.47 776,892 2,925 1.51 
Short-term borrowings114,966 27 0.09 112,063 47 0.17 
Long-term debt206,495 2,393 4.65 233,819 2,562 4.41 
Total interest-bearing liabilities5,638,630 3,852 0.27 5,690,976 8,295 0.59 
Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)2,604,695 2,130,775 
Other liabilities110,264 150,254 
Shareholders’ equity1,098,094 1,071,549 
Total noninterest-bearing funding sources3,813,053 3,352,578 
Total Liabilities and Shareholders’ Equity$9,451,683 $9,043,554 
Net Interest Income and Net Yield on Interest-Earning Assets$68,489 3.17 %$67,045 3.29 %
(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 SeptemberJune 30, 20202021 and 2019.2020.
(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.

 
5964
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 SeptemberJune 30, 20202021 compared with SeptemberJune 30, 2019:2020:
 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$13 $3,003 $(2,990)
Tax-free investment securities(166)(152)(14)
Taxable investment securities(1,625)77 (1,702)
Loans(7,261)11,589 (18,850)
Total interest income (b)(9,039)14,517 (23,556)
Interest-bearing liabilities:
Interest-bearing demand deposits(1,858)480 (2,338)
Savings deposits(1,811)882 (2,693)
Time deposits(1,556)(739)(817)
Short-term borrowings(1,585)(995)(590)
Long-term debt(96)(10)(86)
Total interest expense(6,906)(382)(6,524)
Net interest income$(2,133)$14,899 $(17,032)
 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$58 $38 $20 
Tax-free investment securities(143)(113)(30)
Taxable investment securities(166)1,629 (1,795)
Loans(2,748)(62)(2,686)
Total interest income (b)(2,999)1,492 (4,491)
Interest-bearing liabilities:
Interest-bearing demand deposits(142)(2)(140)
Savings deposits(1,728)256 (1,984)
Time deposits(2,384)(1,195)(1,189)
Short-term borrowings(20)1 (21)
Long-term debt(169)(300)131 
Total interest expense(4,443)(1,240)(3,203)
Net interest income$1,444 $2,732 $(1,288)
 
(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.
 
65
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 SeptemberJune 30: 
2020201920212020
DollarsPercentageDollarsPercentageDollarsPercentageDollarsPercentage
(dollars in thousands)(dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$3,682 33 %$(17)(1)%Commercial, financial, agricultural and other$3,449 82 %$(1,350)(19)%
Time and demandTime and demand3,450 82 
Commercial credit cardsCommercial credit cards(1)— 
Real estate constructionReal estate construction270 3 (155)(6)Real estate construction129 3 360 5 
Residential real estateResidential real estate(870)(8)125 5 Residential real estate(56)(1)1,517 22 
Residential first lienResidential first lien21 1 
Residential junior lien/home equityResidential junior lien/home equity(77)(2)
Commercial real estateCommercial real estate7,648 68 1,037 38 Commercial real estate(1,867)(45)4,134 60 
MultifamilyMultifamily128 3 
Nonowner occupiedNonowner occupied(972)(23)
Owner occupiedOwner occupied(1,023)(25)
Loans to individualsLoans to individuals482 4 1,718 64 Loans to individuals2,547 61 2,198 32 
AutomobileAutomobile2,404 57 
Consumer credit cardsConsumer credit cards(107)(2)
Consumer otherConsumer other250 6 
Total$11,212 100 %$2,708 100 %
Provision for credit losses on loansProvision for credit losses on loans$4,202 100 %$6,859 100 %
Provision for off-balance sheet credit exposureProvision for off-balance sheet credit exposure1,211 — 
Total provision for credit lossesTotal provision for credit losses$5,413 $6,859 

The provision for credit losses on loans for the three months ended SeptemberJune 30, 2020 increased2021 decreased in comparison to the three months ended SeptemberJune 30, 20192020 by $8.5$2.7 million. The level of provision expense in the thirdsecond quarter of 20202021 is primarily a result of a $5.6$3.6 million increase in qualitativecharge-off related to one commercial borrower and $1.2 million related to reserves due to the uncertain economic environment and consideration of the estimated probable losses incurred in certain loan categories that may be affected by COVID-19, such as hospitality and retail. In addition, a $1.1 million increase in specific reserves was recognized on four commercial loan relationships.for off-balance sheet commitments. Net charge-offs for the three months ended SeptemberJune 30, 20202021 were $4.3$3.9 million.
The level of provision expense in the thirdsecond quarter of 20192020 was primarily due to $3.7a $5.6 million increase in net charge-offs.qualitative reserves as a result of the uncertain economic environment related to COVID-19. Charge-offs for the three months ended June 30, 2020 were $4.5 million, of which $2.7 million was provided for in prior quarters.

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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


Below is an analysis of the consolidated allowance for credit losses for the three months ended SeptemberJune 30, 20202021 and 20192020 and the year-ended December 31, 2019:2020:
9/30/20209/30/201912/31/2019
 (dollars in thousands)
Balance, beginning of period$81,441 $51,061 $47,764 
Loans charged off:
Commercial, financial, agricultural and other3,395 791 3,393 
Real estate construction— — — 
Residential real estate283 383 1,042 
Commercial real estate— 1,382 2,008 
Loans to individuals1,229 1,574 5,831 
Total loans charged off4,907 4,130 12,274 
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other57 62 326 
Real estate construction— 74 158 
Residential real estate166 17 315 
Commercial real estate110 81 189 
Loans to individuals228 162 626 
Total recoveries561 396 1,614 
Net credit losses4,346 3,734 10,660 
Provision charged to expense11,212 2,708 14,533 
Balance, end of period$88,307 $50,035 $51,637 
6/30/20216/30/202012/31/2020
 (dollars in thousands)
Balance, beginning of period$96,763 $79,075 $51,637 
Adoption of accounting standard - ASU 2016-13(1)
— — 13,393 
Loans charged off:
Commercial, financial, agricultural and other3,887 1,285 6,318 
Real estate construction— — — 
Residential real estate14 73 1,040 
Commercial real estate7 2,151 4,939 
Loans to individuals931 1,397 6,953 
Total loans charged off4,839 4,906 19,250 
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other103 51 314 
Real estate construction135 26 26 
Residential real estate174 71 414 
Commercial real estate1 — 312 
Loans to individuals499 265 991 
Total recoveries912 413 2,057 
Net charge-offs3,927 4,493 17,193 
Provision for credit losses on loans charged to expense4,202 6,859 53,472 
Balance, end of period$97,038 $81,441 $101,309 

Noninterest Income
The following table presents the components of noninterest income for the three months ended SeptemberJune 30: 
20202019$ Change% Change20212020$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Income:Noninterest Income:Noninterest Income:
Trust incomeTrust income$2,554 $2,325 $229 10 %Trust income$2,706 $2,109 $597 28 %
Service charges on deposit accountsService charges on deposit accounts4,035 4,954 (919)(19)Service charges on deposit accounts4,310 3,286 1,024 31 
Insurance and retail brokerage commissionsInsurance and retail brokerage commissions2,156 1,912 244 13 Insurance and retail brokerage commissions1,978 1,831 147 8 
Income from bank owned life insuranceIncome from bank owned life insurance1,547 1,540 7 — Income from bank owned life insurance1,509 1,800 (291)(16)
Card-related interchange incomeCard-related interchange income6,441 5,629 812 14 Card-related interchange income7,406 5,886 1,520 26 
Swap fee incomeSwap fee income41 421 (380)(90)Swap fee income1,252 609 643 106 
Other incomeOther income1,827 1,865 (38)(2)Other income1,997 1,680 317 19 
SubtotalSubtotal18,601 18,646 (45)— Subtotal21,158 17,201 3,957 23 
Net securities gainsNet securities gains20 9 11 122 Net securities gains10 8 2 25 
Gain on sale of mortgage loansGain on sale of mortgage loans6,437 2,599 3,838 148 Gain on sale of mortgage loans3,084 4,243 (1,159)(27)
Gain on sale of other loans and assetsGain on sale of other loans and assets1,871 970 901 93 Gain on sale of other loans and assets2,111 581 1,530 263 
Derivatives mark to marketDerivatives mark to market(160)(45)(115)256 Derivatives mark to market(277)(221)(56)25 
Total noninterest incomeTotal noninterest income$26,769 $22,179 $4,590 21 %Total noninterest income$26,086 $21,812 $4,274 20 %

Total noninterest income for the three months ended SeptemberJune 30, 20202021 increased $4.6$4.3 million, or 20%, in comparison to the three months ended SeptemberJune 30, 2019.2020. The most significant changes include a $3.8 million increase in the gain on sale of mortgage loans primarily due to growth in our mortgage lending area and a $0.9$1.5 million increase in gain on sale of other loans and assets due to an increase in the volume of SBA loans sold during the quarter. Additionally, card-related interchange income increased $0.8$1.5 million of which $0.5and service charges on deposits increased $1.0 million is attributabledue to the Santander branches acquiredgrowth in September 2019. Service charges oncustomer accounts and
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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


deposits decreased $0.9transactions. Gain on sale of mortgage loans declined $1.2 million for the three months ended June 30, 2021 compared to the comparable period in 2020 due to customers maintaining higher deposit balances as a resultlower level of the CARES Act stimulus in 2020.sold mortgages.
Noninterest Expense
The following table presents the components of noninterest expense for the three months ended SeptemberJune 30: 
20202019$ Change% Change20212020$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Expense:Noninterest Expense:Noninterest Expense:
Salaries and employee benefitsSalaries and employee benefits$28,823 $28,674 $149 1 %Salaries and employee benefits$28,347 $28,773 $(426)(1)%
Net occupancyNet occupancy4,609 4,521 88 2 Net occupancy3,881 4,397 (516)(12)
Furniture and equipmentFurniture and equipment4,033 3,904 129 3 Furniture and equipment3,866 3,657 209 6 
Data processingData processing2,741 2,825 (84)(3)Data processing3,192 2,596 596 23 
Advertising and promotionAdvertising and promotion1,115 1,140 (25)(2)Advertising and promotion1,355 1,535 (180)(12)
Pennsylvania shares taxPennsylvania shares tax1,254 1,189 65 5 Pennsylvania shares tax1,258 1,254 4 — 
Intangible amortizationIntangible amortization939 865 74 9 Intangible amortization863 919 (56)(6)
Other professional fees and servicesOther professional fees and services937 969 (32)(3)Other professional fees and services1,091 920 171 19 
FDIC insuranceFDIC insurance876 35 841 2,403 FDIC insurance438 733 (295)(40)
Other operatingOther operating6,555 6,577 (22)— Other operating6,442 7,094 (652)(9)
SubtotalSubtotal51,882 50,699 1,183 2 Subtotal50,733 51,878 (1,145)(2)
Loss on sale or write-down of assetsLoss on sale or write-down of assets63 152 (89)(59)Loss on sale or write-down of assets43 140 (97)(69)
Merger and acquisition related— 3,738 (3,738)(100)
COVID-19 relatedCOVID-19 related125 — 125 — COVID-19 related232 419 (187)(45)
Voluntary early retirement3,304 — 3,304 — 
Branch consolidationBranch consolidation2,544 — 2,544 — Branch consolidation(22)— (22)— 
Litigation and operational lossesLitigation and operational losses329 308 21 7 Litigation and operational losses556 319 237 74 
Total noninterest expenseTotal noninterest expense$58,247 $54,897 $3,350 6 %Total noninterest expense$51,542 $52,756 $(1,214)(2)%

Noninterest expense increased $3.4decreased $1.2 million, or 6%2%, for the three months ended SeptemberJune 30, 20202021 compared to the same period in 2019. Contributing2020. Net occupancy expense decreased $0.5 million and salary and employee benefit expense decreased $0.4 million. These decreases are largely attributable to the higher expensesconsolidation of 20% of the Bank’s branch facilities in 2020 is a $0.8 million increase in FDIC Insurance expense. In the thirdfourth quarter of 2019, we received2020. Other operating expense decreased $0.7 million as a $0.6result of a $0.9 million credit due to the FDIC deposit insurance fund reaching the required minimum reserve ratio. Because these credits were fullydecrease in unfunded commitment expense recognized in 2020. As a result of the second quarteradoption of 2020, noCECL, the unfunded commitment expense is now recorded as part of provision for credit was recognized during the three months ended September 30, 2020.

Additionally, noninterest expense was impacted by $3.3 million and $2.5 million recognized for the voluntary early retirement and branch consolidation initiatives, respectively. Branch consolidation expenses include $1.4 million related to writedowns on owned properties and leasehold improvements and $0.7 million in lease termination expense. Offsetting these increases is a decrease of $3.7 million in merger and acquisition expenses related to the Santander acquisition. There were no similar expenses in the current quarter.losses.
Income Tax
The provision for income taxes decreased $1.9increased $2.7 million for the three months ended SeptemberJune 30, 2020,2021, compared to the corresponding period in 2019.2020.  The effective tax rate decreased 30increased 330 basis points from 19.3%17.4% to 19.0%20.7% due to a $9.3$8.4 million decreaseincrease in income before income taxes.
We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the three months ended SeptemberJune 30, 20202021 and 2019.2020.
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 ninesix months of 2020,2021, the maturity and redemption of investment securities provided $349.4$344.4 million in liquidity. These
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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


funds contributed to the liquidity used to pay down short-term borrowings, originate loans, purchase investment securities and fund depositor withdrawals.
We also have available unused wholesale sources of liquidity, including overnight federal funds and repurchase agreements, advances from the FHLB of Pittsburgh, borrowings through the discount window at the Federal Reserve Bank of Cleveland (“FRB”) and access to certificates of deposit through brokers.
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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


We participate in the Certificate of Deposit Account Registry Services (“CDARS”) program as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of SeptemberJune 30, 2020,2021, our maximum borrowing capacity under this program was $1.4 billion, and as of that date there was $4.5$7.5 million outstanding with an average weighted rate of 0.85%0.37% and an average original term of 334303 days. These deposits are part of a reciprocal program which allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.
An additional source of liquidity is the FRB Borrower-in-Custody of Collateral program, which enables us to pledge certain loans that are not being used as collateral at the FHLB as collateral for borrowings at the FRB. At SeptemberJune 30, 2020,2021, the borrowing capacity under this program totaled $831.5$931.4 million and there was no balance outstanding. As of SeptemberJune 30, 2020,2021, our maximum borrowing capacity at the FHLB of Pittsburgh was $1.5$1.8 billion and as of that date amounts used against this capacity included $56.4$5.9 million in outstanding borrowings and no outstanding letters of credit.
We also have available unused federal funds lines with fivefour correspondent banks. These lines have an aggregate commitment of $180.0$160.0 million with no outstanding balance as of SeptemberJune 30, 2020.2021. In addition, we have available unused repo lines with three correspondent banks. These lines have an aggregate commitment of $456.0$620.3 million with no outstanding balance as of SeptemberJune 30, 2020.2021.
First Commonwealth Financial Corporation has an unsecured $20.0 million line of credit with another financial institution. As of SeptemberJune 30, 2020,2021, there are no amounts outstanding on this line.
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, 2020December 31, 2019June 30, 2021December 31, 2020
(dollars in thousands) (dollars in thousands)
Noninterest-bearing demand deposits(a)
Noninterest-bearing demand deposits(a)
$2,301,821 $1,690,247 
Noninterest-bearing demand deposits(a)
$2,617,651 $2,319,958 
Interest-bearing demand deposits(a)
Interest-bearing demand deposits(a)
315,806 254,981 
Interest-bearing demand deposits(a)
269,451 250,353 
Savings deposits(a)
Savings deposits(a)
4,425,119 3,896,536 
Savings deposits(a)
4,566,815 4,305,391 
Time depositsTime deposits661,161 835,851 Time deposits431,102 562,964 
TotalTotal$7,703,907 $6,677,615 Total$7,885,019 $7,438,666 
(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 ninesix months of 2020,2021, total deposits increased $1.0 billion.$446.4 million. Interest-bearing demand and savings deposits increased $589.4$280.5 million, noninterest-bearing demand deposits increased $611.6$297.7 million and time deposits decreased $174.7$131.9 million. The deposit increase is a result of elevated customer deposit balances from PPP loan proceeds and the deposit of Federal stimulus checks into our customers' deposit accounts.
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 0.520.54 and 0.800.51 at SeptemberJune 30, 20202021 and December 31, 2019,2020, 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
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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


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.

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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


The following is the gap analysis as of SeptemberJune 30, 20202021 and December 31, 2019:2020: 
September 30, 2020 June 30, 2021
0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years		 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
(dollars in thousands) (dollars in thousands)
LoansLoans$600,799 $549,600 $951,753 $2,102,152 $3,700,971 $1,095,176 Loans$609,441 $605,333 $1,039,491 $2,254,265 $3,583,352 $838,620 
InvestmentsInvestments217,878 95,452 166,510 479,840 531,602 128,234 Investments107,866 108,841 185,831 402,538 767,692 427,536 
Other interest-earning assetsOther interest-earning assets283,037 — — 283,037 — — Other interest-earning assets194,948 — — 194,948 — — 
Total interest-sensitive assets (ISA)Total interest-sensitive assets (ISA)1,101,714 645,052 1,118,263 2,865,029 4,232,573 1,223,410 Total interest-sensitive assets (ISA)912,255 714,174 1,225,322 2,851,751 4,351,044 1,266,156 
Certificates of depositCertificates of deposit204,060 141,316 172,511 517,887 140,922 2,086 Certificates of deposit107,630 77,552 119,690 304,872 124,303 1,854 
Other depositsOther deposits4,740,926 — — 4,740,926 — — Other deposits4,836,266 — — 4,836,266 — — 
BorrowingsBorrowings194,627 104 50,208 244,939 1,665 104,344 Borrowings179,737 198 396 180,331 3,167 101,959 
Total interest-sensitive liabilities (ISL)Total interest-sensitive liabilities (ISL)5,139,613 141,420 222,719 5,503,752 142,587 106,430 Total interest-sensitive liabilities (ISL)5,123,633 77,750 120,086 5,321,469 127,470 103,813 
GapGap$(4,037,899)$503,632 $895,544 $(2,638,723)$4,089,986 $1,116,980 Gap$(4,211,378)$636,424 $1,105,236 $(2,469,718)$4,223,574 $1,162,343 
ISA/ISLISA/ISL0.21 4.56 5.02 0.52 29.68 11.49 ISA/ISL0.18 9.19 10.20 0.54 34.13 12.20 
Gap/Total assetsGap/Total assets43.47 %5.42 %9.64 %28.41 %44.03 %12.02 %Gap/Total assets44.79 %6.77 %11.75 %26.27 %44.92 %12.36 %

 December 31, 2019
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans$2,818,183 $313,651 $494,467 $3,626,301 $2,052,952 $475,962 
Investments103,225 79,866 162,225 345,316 633,178 235,437 
Other interest-earning assets19,510 — — 19,510 — — 
Total interest-sensitive assets (ISA)2,940,918 393,517 656,692 3,991,127 2,686,130 711,399 
Certificates of deposit121,302 161,488 303,245 586,035 246,512 2,822 
Other deposits4,151,518 — — 4,151,518 — — 
Borrowings274,213 193 385 274,791 103,082 53,064 
Total interest-sensitive liabilities (ISL)4,547,033 161,681 303,630 5,012,344 349,594 55,886 
Gap$(1,606,115)$231,836 $353,062 $(1,021,217)$2,336,536 $655,513 
ISA/ISL0.65 2.43 2.16 0.80 7.68 12.73 
Gap/Total assets19.33 %2.79 %4.25 %12.29 %28.12 %7.89 %
 December 31, 2020
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans$596,292 $495,759 $942,174 $2,034,225 $3,424,936 $1,270,694 
Investments109,706 82,052 158,357 350,115 495,013 150,976 
Other interest-earning assets256,572 — — 256,572 — — 
Total interest-sensitive assets (ISA)962,570 577,811 1,100,531 2,640,912 3,919,949 1,421,670 
Certificates of deposit163,340 120,458 135,285 419,083 141,577 2,153 
Other deposits4,555,744 — — 4,555,744 — — 
Borrowings189,645 50,105 209 239,959 1,673 104,166 
Total interest-sensitive liabilities (ISL)4,908,729 170,563 135,494 5,214,786 143,250 106,319 
Gap$(3,946,159)$407,248 $965,037 $(2,573,874)$3,776,699 $1,315,351 
ISA/ISL0.20 3.39 8.12 0.51 27.36 13.37 
Gap/Total assets43.52 %4.49 %10.64 %28.38 %41.65 %14.51 %

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)
June 30, 2021 ($)$(6,202)$(3,286)$2,944 $5,000 
June 30, 2021 (%)(2.21)%(1.17)%1.05 %1.78 %
December 31, 2020 ($)$(4,911)$(2,621)$3,340 $6,229 
December 31, 2020 (%)(1.79)%(0.95)%1.22 %2.27 %
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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


 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
September 30, 2020 ($)$(6,033)$(3,754)$2,987 $5,509 
September 30, 2020 (%)(2.18)%(1.35)%1.08 %1.99 %
December 31, 2019 ($)$(12,540)$(5,880)$4,279 $8,032 
December 31, 2019 (%)(4.52)%(2.12)%1.54 %2.90 %
The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.
 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
September 30, 2020 ($)$(16,081)$(11,456)$9,659 $17,680 
September 30, 2020 (%)(5.80)%(4.13)%3.48 %6.37 %
December 31, 2019 ($)$(41,661)$(21,604)$12,259 $22,291 
December 31, 2019 (%)(15.02)%(7.79)%4.42 %8.04 %
 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
June 30, 2021 ($)$(18,723)$(12,395)$7,574 $13,947 
June 30, 2021 (%)(6.68)%(4.42)%2.70 %4.98 %
December 31, 2020 ($)$(13,807)$(9,175)$9,921 $18,408 
December 31, 2020 (%)(5.03)%(3.34)%3.61 %6.70 %
The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment. Results of the 100 and 200 basis point interest rate decline scenario are affected by the fact that many of our interest-bearing liabilities are at rates below 1%, with an assumed floor of zero in the model. In the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the cost of our interest-bearing liabilities averaged 0.64%0.31% and 1.08%0.72%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 3.79%3.49% and 4.55%3.97%, respectively.
Asset/liability models require that certain assumptions be made, such as prepayment rates on earning assets and the impact of pricing on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans and published industry experience. While management believes such assumptions to be reasonable, there can be no assurance that modeled results will approximate actual results.
Credit Risk
First Commonwealth maintains an allowance for credit losses at a level deemed sufficient for losses inherent in the loan 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.

On March 27, 2020, the CARES Act was signed into law, which provides banking organizations with optional, temporary relief from complying with Accounting Standards Update No. 2016-13, “Financial Instruments—Credit Losses,” Topic 326, “Measurement of Credit Losses on Financial Instruments” (“CECL”). The Company had planned to adopt CECL as of January 1, 2020, however, due to the uncertain economic conditions caused by the COVID-19 pandemic and the resulting volatility of economic forecasts, the Company elected to defer its adoption of CECL and has, therefore, calculated reserves for loan losses under the incurred loss method at September 30, 2020.
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 impairednonperforming 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 $3.4$5.5 million at SeptemberJune 30, 20202021 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.
Nonperforming loans include nonaccrual loans and loans classified as troubled debt restructurings. Nonaccrual loans represent loans on which interest accruals have been discontinued. Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of
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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


the borrower, who could not obtain comparable terms from alternative financing sources. In the first ninesix months of 2020, 332021, fourteen loans totaling $1.8$13.4 million were identified as troubled debt restructurings.
The balance of troubled debt restructured loans decreased $2.0increased $7.3 million from December 31, 2019.2020. Changes during the first ninesix months of 20202021 can be attributed to new restructurings in conjunction with bankruptcy, including two commercial relationships totaling $13.0 million, offset by payments received on existing troubled debt restructured loans, including the $1.9 million payoff of a$1.7 million of two commercial loan relationship.relationships and the pay down of one commercial relationship of $2.7 million. Please refer to Note 87 “Loans and Allowance for Credit Losses,” for additional information on troubled debt restructurings.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. These modifications typically provide for the deferral of both principal and interest for 90 days. The CARES Act, along with a joint agency statement issued by banking regulators, provides that modifications meeting certain criteria made in response to COVID-19 do not need to be accounted for as a TDR.troubled debt restructuring. As of SeptemberJune 30, 2020, the Company has granted approximately 6,800 deferrals to its2021, loan customers with an aggregate principal balancesbalance of $1.4 billion. Payment deferrals granted on approximately 6,300 accounts or $1.3 billion$59.5 million were still in balances have expired as of October 23, 2020.a payment deferral period. It is possible that some of these deferrals will be extended in order to provide support for certain COVID-19 impacted customers. As of October 23, 2020, for the accounts on which payment deferrals have expired, 145 accounts or $13.2 million are past due 30-59 days, 25 accounts or $0.4 million are past due 60-89 days and 45 accounts or $1.2 million are past due 90 or more days and still in accruing status.

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
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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


when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
Nonperforming loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The probable risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows. Losses or a specifically assigned allowance for loan losses are recognized where appropriate.
Nonperforming loans, including loans held for sale, increased $17.5decreased $1.3 million to $49.7$52.8 million at SeptemberJune 30, 20202021 compared to $32.2$54.1 million at December 31, 2019.2020. During the ninesix months ended SeptemberJune 30, 2020, $40.42021, $15.4 million of loans were moved to nonaccrual, including the transfer of fiveone commercial real estate relationships totaling $32.5$6.3 million and onea $3.9 million commercial, financial, agricultural and other relationship totaling $0.7 million.industrial loan to one borrower. Offsetting these additions was a $3.9sale of a $5.0 million commercial real estate relationship, a $1.0 million payoff of a commercial, financial, agriculture and other relationship, a $0.8 million payoff of a commercial real estate relationship and a $1.9$1.4 million payoffcharge-off of a commercial financial, agricultural and other relationship andreal estate relationship. Subsequent to June 30, 2021, a $2.3$6.7 million paydown ofpayoff on a commercial financial, agricultural and other relationship.real estate nonaccrual loan was received from the borrower.
The allowance for credit losses as a percentage of nonperforming loans was 177.58%183.81% as of SeptemberJune 30, 2020,2021, compared to 160.28%187.43% at December 31, 2019,2020, and 141.64%145.37% at SeptemberJune 30, 2019.2020. The amount of specific reserves included in the allowance for nonperforming loans 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 $7.4$2.9 million and general reserves of $80.9$94.1 million as of SeptemberJune 30, 2020.2021. Specific reserves increased $5.0decreased $2.0 million from December 31, 2019,2020, and $5.9$3.9 million from SeptemberJune 30, 2019.2020. The increasedecrease from both periods is primarily due to the charge-off and payoffs of relationships with specific reserves of $5.7 million added on the $27.0 million in new commercial real estate nonaccrual loans. Offsetting this was a $0.9 million decrease in specific reserves related to commercial, financial, agricultural and other loans and an $0.8 million decrease related to commercial real estate loans due to the aforementioned payoffs.assigned. Management believes that the allowance for credit losses is at a level deemed sufficient to absorb losses inherent in the loan portfolio at SeptemberJune 30, 2020.2021.
Criticized loans totaled $189.0$250.4 million at SeptemberJune 30, 20202021 and represented 2.7%3.7% of the loan portfolio. The level of criticized loans increaseddecreased as of SeptemberJune 30, 20202021 when compared to December 31, 2019,2020, by $88.4$52.4 million, or 87.8%17.3%. Classified loans totaled $80.2$56.0 million at SeptemberJune 30, 20202021 compared to $52.0$76.2 million at December 31, 2019, an increase2020, a decrease of $28.2$20.2 million, or 54.1%27%. The increasedecrease in criticized loans is the result of the aforementioned changes in nonperforming loans as well as credit downgradesupgrades on borrowers primarily in the hospitality and retail sectors.sector. Delinquency on accruing loans for the same period decreased $1.9increased $5.4 million, or 14.4%44%, the majority of which are residential real estate and consumer loans.
The allowance for credit losses was $88.3$97.0 million at SeptemberJune 30, 2020,2021, or 1.27%1.44% of total loans outstanding, compared to 0.83%1.50% reported at December 31, 2019,2020, and 0.82%1.18% at SeptemberJune 30, 2019.2020. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, for impairment, as a percentage of non-impairedperforming loans were 1.17%1.41% at SeptemberJune 30, 20202021 compared to 0.80%1.43% at December 31, 20192020 and 0.80%1.09% at SeptemberJune 30, 2019. General reserves as a percentage of non-impaired originated loans were 1.24% at September 30, 2020 compared to 0.86% at December 31, 2019 and 0.87% at September 30, 2019.2020. The increasedecrease in the general reserve for both periodsfrom December 31, 2020 is reflective of higher qualitativelower unemployment rates utilized to forecast future loan losses at June 30, 2021. The increase in general reserves from June 30, 2020 can be attributed to the adoption of CECL and the related impact of future economic conditions.
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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


maintained at September 30, 2020 as a result of the COVID-19 pandemic. These reserves were increased in order to provide for risks related to the uncertain economic environment, the large volume of consumer forbearances granted as of September 30, 2020 as a result of COVID-19 as well as consideration of the probable losses incurred in certain loan categories, such as hospitality and retail.
The following table provides information related to nonperforming assets, the allowance for credit losses and other credit-related measures: 
September 30, December 31, 2019  June 30, December 31, 2020 
2020 2019  2021 2020 
(dollars in thousands)  (dollars in thousands) 
Nonperforming Loans:Nonperforming Loans:Nonperforming Loans:
Loans on nonaccrual basisLoans on nonaccrual basis$38,139   $16,227 $18,638   Loans on nonaccrual basis$22,219   $44,968 $30,801   
Loans held for sale on a nonaccrual basis—   —   —   
Troubled debt restructured loans on nonaccrual basisTroubled debt restructured loans on nonaccrual basis4,511   11,074   6,037   Troubled debt restructured loans on nonaccrual basis23,981   3,600   14,740   
Troubled debt restructured loans on accrual basisTroubled debt restructured loans on accrual basis7,078   8,024   7,542   Troubled debt restructured loans on accrual basis6,593   7,455   8,512   
Total nonperforming loansTotal nonperforming loans$49,728   $35,325   $32,217   Total nonperforming loans$52,793   $56,023   $54,053   
Loans past due 30 to 90 days and still accruingLoans past due 30 to 90 days and still accruing$10,259 $12,387 $11,378 Loans past due 30 to 90 days and still accruing$5,895 $6,077 $10,638 
Loans past due in excess of 90 days and still accruingLoans past due in excess of 90 days and still accruing$1,249   $2,054   $2,073   Loans past due in excess of 90 days and still accruing$903   $1,421   $1,523   
Other real estate ownedOther real estate owned$1,079   $1,622   $2,228   Other real estate owned$394   $1,634   $1,215   
Loans held for sale at end of periodLoans held for sale at end of period$37,998 $20,288 $15,989 Loans held for sale at end of period$19,530 $30,409 $33,436 
Portfolio loans outstanding at end of periodPortfolio loans outstanding at end of period$6,949,716   $6,099,561 $6,189,148   Portfolio loans outstanding at end of period$6,740,535   $6,922,075 $6,761,183   
Average loans outstandingAverage loans outstanding$6,670,819 (a) $5,935,427 (a) $5,987,398 (b) Average loans outstanding$6,776,560 (a) $6,516,854 (a) $6,737,339 (b) 
Nonperforming loans as a percentage of total loansNonperforming loans as a percentage of total loans0.71 %0.58 %0.52 %Nonperforming loans as a percentage of total loans0.78 %0.81 %0.80 %
Provision for credit lossesProvision for credit losses$49,038 (a) $9,638 (a) $14,533 (b) Provision for credit losses$2,926 (a) $37,826 (a) $53,472 (b) 
Allowance for credit lossesAllowance for credit losses$88,307   $50,035   $51,637   Allowance for credit losses$97,038   $81,441   $101,309   
Net charge-offsNet charge-offs$12,368 (a) $7,367 (a) $10,660 (b) Net charge-offs$7,197 (a) $8,022 (a) $17,193 (b) 
Net charge-offs as a percentage of average loans outstanding (annualized)Net charge-offs as a percentage of average loans outstanding (annualized)0.25 %0.17 %0.18 %Net charge-offs as a percentage of average loans outstanding (annualized)0.21 %0.25 %0.26 %
Provision for credit losses as a percentage of net charge-offsProvision for credit losses as a percentage of net charge-offs396.49 %(a) 130.83 %(a) 136.33 %(b) Provision for credit losses as a percentage of net charge-offs40.66 %(a) 471.53 %(a) 311.01 %(b) 
Allowance for credit losses as a percentage of end-of-period loans outstanding (c)Allowance for credit losses as a percentage of end-of-period loans outstanding (c)1.27 %0.82 %0.83 %Allowance for credit losses as a percentage of end-of-period loans outstanding (c)1.44 %1.18 %1.50 %
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans (c)Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans (c)1.38 %0.82 %0.83 %Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans (c)1.50 %1.28 %1.61 %
Allowance for credit losses on originated loans as a percentage of end-of-period originated loans outstanding1.31 %0.90 %0.90 %
Allowance for credit losses on originated loans as a percentage of end-of-period originated loans outstanding, excluding PPP loans1.44 %0.90 %0.90 %
Allowance for credit losses as a percentage of nonperforming loans (d)Allowance for credit losses as a percentage of nonperforming loans (d)177.58 %141.64 %160.28 %Allowance for credit losses as a percentage of nonperforming loans (d)183.81 %145.37 %187.43 %
(a)For the nine-monthsix-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.
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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


The following tables show the outstanding balances of our loan 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, 2020December 31, 2019
 Amount%Amount%
 (dollars in thousands)
Commercial, financial, agricultural and other$1,736,736 25 %$1,241,853 20 %
Real estate construction452,989 7 449,039 7 
Residential real estate1,744,020 25 1,681,362 27 
Commercial real estate2,215,311 32 2,117,519 34 
Loans to individuals800,660 11 699,375 12 
Total loans and leases net of unearned income$6,949,716 100 %$6,189,148 100 %
 June 30, 2021December 31, 2020
 Amount%Amount%
 (dollars in thousands)
Commercial, financial, agricultural and other$1,374,177 20 %$1,555,986 23 %
Real estate construction414,816 6 427,221 6 
Residential real estate1,828,783 27 1,750,592 26 
Commercial real estate2,205,758 33 2,211,569 33 
Loans to individuals917,001 14 815,815 12 
Total loans and leases net of unearned income$6,740,535 100 %$6,761,183 100 %
During the ninesix months ended SeptemberJune 30, 2020,2021, loans increased $760.6decreased $20.6 million, or 12.3%0.3%, compared to balances outstanding at December 31, 2019. All loan categories reflect growth for the nine months ended September 30, 2020, with commercial, financial, agricultural and other loans, commercial real estate and loans to individuals providing a majority of the growth.2020.
Commercial, financial, agricultural and other loans increased $494.9decreased $181.8 million or 39.9%, due to the originationpayoff of $570.9$186.5 million in PPP loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the SBA under the CARES Act and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. These loans carry a fixed rate of 1.00% and currently yield 2.7% after considering origination fees and costs. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of loan. PPP loans are for a term of two years, if not forgiven, in whole or in part and payments are deferred for the first six months of the loan. Although the Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liability to the Company associated with participation in the program that cannot be determined at this time.
Real estate construction loans increased $4.0 million, or 0.9%, primarily due to growth in residential real estate construction. Residential real estate grew $62.7 million, or 3.7%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $97.8 million, or 4.6%, primarily due to construction real estate loans that converted to permanent loans. Loans to individuals increased $101.3 million, or 14.5%, as a result of growth in the indirect auto and recreational vehicle portfolio of $118.8 million offset by a decrease in other consumer loans of $17.5 million.
As indicated in the table below, commercial real estate and residential real estate loans represent a significant portion of the nonperforming loans as of September 30, 2020. See discussions related to the provision for credit losses and loans for more information.
For the Nine Months Ended September 30, 2020As of September 30, 2020
 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$4,977 40.24 %0.10 %$5,619 11.30 %0.08 %
Real estate construction(26)(0.21)— 362 0.73 0.01 
Residential real estate621 5.02 0.01 11,391 22.91 0.16 
Commercial real estate2,263 18.30 0.05 31,850 64.04 0.45 
Loans to individuals4,533 36.65 0.09 506 1.02 0.01 
Total loans, net of unearned income$12,368 100.00 %0.25 %$49,728 100.00 %0.71 %
Net charge-offs for the nine months ended September 30, 2020 totaled $12.4 million, compared to $7.4 million for the nine months ended September 30, 2019. The most significant charge-offs during the nine months ended September 30, 2020 included $4.2 million in charge-offs related to three commercial, financial, agricultural and other loan relationships and a $2.2 million charge-off related to a commercial real estate loan relationship, as well as $4.5 million in net charge-offs related to
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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


Real estate construction loans decreased $12.4 million, or 2.9%, primarily due to the completion of both commercial and residential real estate construction. Residential real estate grew $78.2 million, or 4.5%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans decreased $5.8 million, or 0.3%, primarily due to payoffs and less new loan volume. Loans to individuals increased $101.2 million, or 12.4%, as a result of growth in the indirect auto and recreational vehicle portfolio of $116.4 million offset by a decrease in other consumer loans of $15.2 million.
As indicated in the table below, commercial real estate and residential real estate loans represent a significant portion of the nonperforming loans as of June 30, 2021. See discussions related to the provision for credit losses and loans for more information.
For the Six Months Ended June 30, 2021As of June 30, 2021
 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$4,263 59.23 %0.13 %$14,335 27.15 %0.21 %
Real estate construction(135)(1.87)(0.01)54 0.10 — 
Residential real estate(92)(1.28)— 10,029 19.00 0.15 
Commercial real estate1,517 21.08 0.04 27,899 52.85 0.41 
Loans to individuals1,644 22.84 0.05 476 0.90 0.01 
Total loans, net of unearned income$7,197 100.00 %0.21 %$52,793 100.00 %0.78 %
Net charge-offs for the six months ended June 30, 2021 totaled $7.2 million, compared to $8.0 million for the six months ended June 30, 2020. The most significant charge-offs during the six months ended June 30, 2021 included a $3.6 million charge-off related to a commercial loan as well as $1.6 million in net charge-offs related to loans to individuals, primarily indirect auto loans and personal credit lines. See discussions related to the provision for credit losses and loans for more information.
Capital Resources
At SeptemberJune 30, 2020,2021, shareholders’ equity was $1.1 billion, an increase of $17.2$37.8 million from December 31, 2019.2020. The increase was primarily the result of $47.8$69.4 million in net income, $2.7$2.8 million in treasury stock sales and an increase of $13.5$10.1 million in the fair value of available for sale investments. These increases were partially offset by $32.4$21.6 million of dividends paid to shareholders and $14.4$2.7 million of common stock repurchases. Cash dividends declared per common share were $0.33 and $0.30$0.225 for the ninesix months ended SeptemberJune 30, 20202021 and 2019, respectively.$0.22 for the six months ended June 30, 2020.
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.
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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


During the second quarter of 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in subordinated debt, which under the regulatory rules qualifies as Tier II capital. This subordinated debt issuance increased the total risk-based capital ratio by 160 basis points.
As of SeptemberJune 30, 2020,2021, the Company had $573.5$292.4 million in PPP loans outstanding under the CARES Act. Because these loans are 100% guaranteed by the SBA, banking regulators confirmed that they have a zero percent risk weight under applicable risk-based capital rules. Additionally, a bank may exclude all PPP loans pledged as collateral to the Federal Reserve's PPP Facility from average total assets when calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility will be included. The PPP loans originated by the Company are included in our leverage ratio as of SeptemberJune 30, 2020,2021, as we did not utilize the PPP Facility.
As of SeptemberJune 30, 2020,2021, 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, all on a fully phased-in basis. 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:
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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


ActualMinimum Capital RequiredRequired to be Considered Well Capitalized ActualMinimum Capital RequiredRequired to be Considered Well Capitalized
Capital
Amount		RatioCapital
Amount		RatioCapital
Amount		Ratio Capital
Amount		RatioCapital
Amount		RatioCapital
Amount		Ratio
(dollars in thousands) (dollars in thousands)
Total Capital to Risk Weighted AssetsTotal Capital to Risk Weighted AssetsTotal Capital to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$992,342 14.44 %$721,538 10.50 %$687,179 10.00 %First Commonwealth Financial Corporation$1,055,710 15.16 %$730,988 10.50 %$696,179 10.00 %
First Commonwealth BankFirst Commonwealth Bank967,486 14.11 719,943 10.50 685,660 10.00 First Commonwealth Bank1,008,415 14.52 729,387 10.50 694,654 10.00 
Tier I Capital to Risk Weighted AssetsTier I Capital to Risk Weighted AssetsTier I Capital to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$807,968 11.76 %$584,102 8.50 %$549,744 8.00 %First Commonwealth Financial Corporation$876,014 12.58 %$591,752 8.50 %$556,943 8.00 %
First Commonwealth BankFirst Commonwealth Bank783,300 11.42 582,811 8.50 548,528 8.00 First Commonwealth Bank828,719 11.93 590,456 8.50 555,723 8.00 
Tier I Capital to Average AssetsTier I Capital to Average AssetsTier I Capital to Average Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$807,968 8.94 %$361,699 4.00 %$452,124 5.00 %First Commonwealth Financial Corporation$876,014 9.58 %$365,819 4.00 %$457,273 5.00 %
First Commonwealth BankFirst Commonwealth Bank783,300 8.68 360,923 4.00 451,154 5.00 First Commonwealth Bank828,719 9.08 365,012 4.00 456,265 5.00 
Common Equity Tier I to Risk Weighted AssetsCommon Equity Tier I to Risk Weighted AssetsCommon Equity Tier I to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$737,968 10.74 %$481,026 7.00 %$446,667 6.50 %First Commonwealth Financial Corporation$806,014 11.58 %$487,325 7.00 %$452,516 6.50 %
First Commonwealth BankFirst Commonwealth Bank783,300 11.42 479,962 7.00 445,679 6.50 First Commonwealth Bank828,719 11.93 486,258 7.00 451,525 6.50 
On OctoberJuly 27, 2020,2021, First Commonwealth Financial Corporation declared a quarterly dividend of $0.11$0.115 per share payable on NovemberAugust 20, 20202021 to shareholders of record as of NovemberAugust 6, 2020.2021. The timing and amount of future dividends are at the discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.
On March 4, 2019,In January 2021, a share repurchase program was authorized by the Board of Directors for up to an additional $25.0 million in shares of the Company's common stock. As of SeptemberJune 30, 2020, 1,969,4742021, 100,736 common shares werehad been repurchased under this program at an average price of $9.41$13.96 per share.
New Accounting Pronouncements
In June 2016,March 2020, FASB released Accounting Standards Update (“ASU”) 2020-04 - Reference Rate Reform (Topic 848), which
provides optional guidance to ease the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Lossesaccounting burden in accounting for, or recognizing the effects from, reference rate
reform on Financial Instruments,” which amends the guidance for recognizing credit losses from an “incurred loss” methodology that delays recognition of credit losses until it is probable a loss has been incurred to an expected credit loss methodology.financial reporting. The Current Expected Credit Loss ("CECL") methodology requires the use of the modified retrospective transition method by means of a one-time cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted.
Thenew standard is effective for the Company as of January 1, 2020, however, on March 27, 2020, the CARES Act was signed into law, providing banking organizations with optional, temporary relief from implementing CECL until the earlier of the date on which the national emergency related to COVID-19 ends or December 31, 2020. As provided by the CARES Act, the Company has elected to delay its adoption of CECL as a result of the uncertaintypotential discontinuance of the London Interbank Offered Rate
("LIBOR") as an available benchmark rate. The standard is elective and volatility around economic forecasts.provides optional expedients and exceptions for
During our implementation process, weapplying GAAP to contracts, hedging relationships, or other transactions that reference LIBOR, or another reference rate
expected to be discontinued. The amendments in the update are effective for all entities between March 12, 2020 and December
31, 2022. The Company has established a CECL implementation team, which includes memberscross-functional working group to manage the Company’s transition from LIBOR.
Products that utilize LIBOR have been identified and have incorporated enhanced language to accommodate the finance and credit areas, with oversight bytransition to
alternative reference rates. The Company continues to evaluate the Chief Executive Officer, Chief Financial Officer and Chief Credit Officer. In the fourth quarter of 2018, a third party was engaged to assist with evaluation of data and methodologies related to this standard.
As part of its processimpact of adopting CECL, Management implemented a third party software solution and determined appropriate loan segments, methodologies, model assumptions and qualitative components. Our implementation plan also included the assessment and documentation of appropriate processes, policies and internal controls. Refinement and completion of this documentation was completed during the first quarter of 2020. Additionally, Management engaged a third party to perform a model validation, which was completed during the fourth quarter of 2019 and first quarter of 2020. During the third quarter of 2020, Management engaged a third party to complete an annual loss driver analysis. Due to updates incorporated into the model as a result of this analysis, a third party model validation was also completed in the third quarter.
Parallel runs were completed beginning with the third quarter of 2019 incorporating operational procedures and internal controls. Based on the composition, characteristics and quality of our loan portfolio as well as prevailing economic conditions and forecasts as of the January 1, 2020 adoption date, we expect that ASU 2016-13 will result in an increase of approximately 20% - 30% to our December 31, 2019 allowance for credit losses of $51.6 million.new standard.
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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


In addition, ASU 2016-13 amends the accounting for credit losses on certain debt securities. Based upon the nature and characteristics of our securities portfolio at the adoption date, management will not record any allowance for credit losses on its debt securities as a result of adopting ASU 2016-13.



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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 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission.
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PART II – OTHER INFORMATION
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

 
ITEM 1.     LEGAL PROCEEDINGS
The information required by this item is set forth in Part I, Item 1, Note 6,5, "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, 2019 and Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    On March 4, 2019,January 25, 2021, a share repurchase program was authorized for up to $25.0 million in shares of the Company's common stock. The following table details the amount of shares repurchased under this program in the thirdsecond quarter of 2020:2021:

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, 2020— — — 1,985,972 
August 31, 2020— — — 1,906,048 
September 30, 20201,207,916 7.58 1,207,916 836,734 
Total1,207,916 $7.58 1,207,916 
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $7.87 at July 31, 2020, $8.20 at August 31, 2020 and $7.74 at September 30, 2020.
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*
April 30, 202154,311 13.95 54,311 1,645,997 
May 31, 2021— — — 1,574,290 
June 30, 202118,413 13.95 18,413 1,676,878 
Total72,724 $13.95 72,724 
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $14.49 at April 30, 2021, $15.15 at May 31, 2021 and $14.07 at June 30, 2021.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
    None

ITEM 4.    MINE SAFETY DISCLOSURES
    Not applicable

ITEM 5.    OTHER INFORMATION
    None
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PART II – OTHER INFORMATION
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 6.     EXHIBITS
Exhibit
Number		  Description  Incorporated by Reference to
    Filed herewith
    Filed herewith
    Filed herewith
    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: NovemberAugust 6, 20202021 /s/ T. Michael Price
 
T. Michael Price
President and Chief Executive Officer
DATED: NovemberAugust 6, 20202021 /s/ James R. Reske
 James R. Reske
Executive Vice President, Chief Financial Officer and Treasurer

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