0000712537us-gaap:~~SpecialMentionMemberfcf:TermLoanReceivableOriginatedFiveOrMoreYearsPriorMemberus-gaap:JuniorLienMember2020-12-31~~SeniorLienMemberfcf:TermLoanReceivableOriginatedInOneYearPriorMemberus-gaap:SpecialMentionMember2021-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~June 30, 2021~~March 31, 2022


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

For the transition period from to

Commission File Number 001-11138

First Commonwealth Financial Corporation

(Exact name of registrant as specified in its charter)


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

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

724-349-7220

(Registrant’s telephone number, including area code)

N/A

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

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


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

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

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

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

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

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

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

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

The number of shares outstanding of issuer’s common stock, $1.00 par value, as of ~~August 5, 2021,~~May 6, 2022, was ~~95,938,473.~~94,316,777.

Table of Contents

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~INDEX~~


		~~PAGE~~

~~PART I.~~	~~Financial Information~~

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

	~~Included in Part I of this report:~~

	~~First Commonwealth Financial Corporation and Subsidiaries~~

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

~~ITEM 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	51

~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	76

~~ITEM 4.~~	~~Controls and Procedures~~	76

~~PART II.~~	~~Other Information~~

~~ITEM 1.~~	~~Legal Proceedings~~	77

~~ITEM 1A.~~	~~Risk Factors~~	77

~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	77

~~ITEM 3.~~	~~Defaults Upon Senior Securities~~	77

~~ITEM 4.~~	~~Mine Safety Disclosures~~	77

~~ITEM 5.~~	~~Other Information~~	77

~~ITEM 6.~~	~~Exhibits~~	78

	~~Signatures~~	79

~~Table of Contents~~

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)~~

June 30, 2021 December 31, 2020
(dollars in thousands, except share data)
Assets
Cash and due from banks $ 89,505 $ 100,009
Interest-bearing bank deposits 194,948 256,572
Securities available for sale, at fair value 1,090,530 831,223
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 investments 11,527 12,227
Loans held for sale 19,530 33,436
Loans:
Portfolio loans 6,740,535 6,761,183
Allowance for credit losses (97,038) (101,309)
Net loans 6,643,497 6,659,874
Premises and equipment, net(1)
118,410 125,517
Other real estate owned 394 1,215
Goodwill 303,328 303,328
Amortizing intangibles, net 12,169 13,492
Bank owned life insurance 226,371 225,952
Other assets 137,968 143,415
Total assets $ 9,402,402 $ 9,068,104
Liabilities
Deposits (all domestic):
Noninterest-bearing $ 2,617,651 $ 2,319,958
Interest-bearing 5,267,368 5,118,708
Total deposits 7,885,019 7,438,666
Short-term borrowings 107,372 117,373
Subordinated debentures 170,694 170,612
Other long-term debt 5,918 56,258
Capital lease obligation 6,155 6,385
Total long-term debt 182,767 233,255
Other liabilities 120,825 210,193
Total liabilities 8,295,983 7,999,487
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, NaN issued 0 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, respectively 113,915 113,915
Additional paid-in capital 495,899 494,683
Retained earnings 644,362 596,614
Accumulated other comprehensive income, net 7,115 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’ equity 1,106,419 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.~~

~~Table of Contents~~

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

INDEX


		PAGE

PART I.	Financial Information

ITEM 1.	Financial Statements and Supplementary Data

	Included in Part I of this report:

	First Commonwealth Financial Corporation and Subsidiaries

	Consolidated Statements of Financial Condition (Unaudited)	3
	Consolidated Statements of Income (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Unaudited)	6
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	7
	Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to the Unaudited Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	66

ITEM 4.	Controls and Procedures	66

PART II.	Other Information

ITEM 1.	Legal Proceedings	67

ITEM 1A.	Risk Factors	67

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67

ITEM 3.	Defaults Upon Senior Securities	67

ITEM 4.	Mine Safety Disclosures	67

ITEM 5.	Other Information	67

ITEM 6.	Exhibits	68

	Signatures	69

Table of Contents

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)


	March 31, 2022		December 31, 2021

	(dollars in thousands, except share data)
Assets
Cash and due from banks	$	120,289	$	84,738
Interest-bearing bank deposits	404,516		310,634
Securities available for sale, at fair value	933,204		1,041,380
Securities held to maturity, at amortized cost (Fair value of $477,088 and $536,651 at March 31, 2022 and December 31, 2021, respectively)	512,911		541,311
Other investments	13,142		12,838
Loans held for sale	10,506		18,583
Loans and leases:
Portfolio loans and leases	6,952,112		6,839,230
Allowance for credit losses	(91,188)		(92,522)
Net loans and leases	6,860,924		6,746,708
Premises and equipment, net	121,470		120,775
Other real estate owned	667		642
Goodwill	303,328		303,328
Amortizing intangibles, net	10,738		11,188
Bank owned life insurance	225,811		224,700
Other assets	124,618		128,268
Total assets	$	9,642,124	$	9,545,093
Liabilities
Deposits (all domestic):
Noninterest-bearing	$	2,719,645	$	2,658,782
Interest-bearing	5,452,202		5,323,716
Total deposits	8,171,847		7,982,498
Short-term borrowings	95,748		138,315
Subordinated debentures	170,815		170,775
Other long-term debt	5,398		5,573
Capital lease obligation	5,799		5,921
Total long-term debt	182,012		182,269
Other liabilities	124,898		132,639
Total liabilities	8,574,505		8,435,721
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	—		—
Common stock, $1 par value per share, 200,000,000 shares authorized; 113,914,902 shares issued at March 31, 2022 and December 31, 2021, and 94,299,039 and 94,233,152 shares outstanding at March 31, 2022 and December 31, 2021, respectively	113,915		113,915
Additional paid-in capital	496,627		496,121
Retained earnings	708,149		691,260
Accumulated other comprehensive loss, net	(68,160)		(8,768)
Treasury stock (19,615,863 and 19,681,750 shares at March 31, 2022 and December 31, 2021, respectively)	(182,912)		(183,156)

Total shareholders’ equity	1,067,619		1,109,372
Total liabilities and shareholders’ equity	$	9,642,124	$	9,545,093

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended
		June 30,				June 30,					March 31,
		2021		2020		2021		2020				2022		2021
		(dollars in thousands, except share data)										(dollars in thousands, except share data)
Interest Income	Interest Income									Interest Income
Interest and fees on loans		$	65,367	$	68,076	$	133,680	$	139,816
Interest and fees on loans and leases										Interest and fees on loans and leases		$	64,394	$	68,313
Interest and dividends on investments:	Interest and dividends on investments:									Interest and dividends on investments:
Taxable interest	Taxable interest	6,302		6,493		11,666		13,466		Taxable interest		6,478		5,364
Interest exempt from federal income taxes	Interest exempt from federal income taxes	154		267		318		582		Interest exempt from federal income taxes		126		164
Dividends	Dividends	138		113		281		377		Dividends		135		143
Interest on bank deposits	Interest on bank deposits	90		32		167		69		Interest on bank deposits		111		77
Total interest income	Total interest income	72,051		74,981		146,112		154,310		Total interest income		71,244		74,061
Interest Expense	Interest Expense									Interest Expense
Interest on deposits	Interest on deposits	1,433		5,686		3,485		14,135		Interest on deposits		813		2,052
Interest on short-term borrowings	Interest on short-term borrowings	27		47		58		635		Interest on short-term borrowings		21		31
Interest on subordinated debentures	Interest on subordinated debentures	2,136		2,142		4,264		4,288		Interest on subordinated debentures		2,129		2,128
Interest on other long-term debt	Interest on other long-term debt	194		354		540		709		Interest on other long-term debt		52		346
Interest on lease obligations	Interest on lease obligations	62		66		124		133		Interest on lease obligations		57		62

Total interest expense	Total interest expense	3,852		8,295		8,471		19,900		Total interest expense		3,072		4,619
Net Interest Income	Net Interest Income	68,199		66,686		137,641		134,410		Net Interest Income		68,172		69,442
Provision for credit losses	Provision for credit losses	5,413		6,859		1,023		37,826		Provision for credit losses		1,964		(4,390)
Net Interest Income after Provision for Credit Losses	Net Interest Income after Provision for Credit Losses	62,786		59,827		136,618		96,584		Net Interest Income after Provision for Credit Losses		66,208		73,832
Noninterest Income	Noninterest Income									Noninterest Income

Net securities gains	Net securities gains	10		8		16		27		Net securities gains		2		6
Trust income	Trust income	2,706		2,109		5,222		4,220		Trust income		2,713		2,516
Service charges on deposit accounts	Service charges on deposit accounts	4,310		3,286		8,357		8,031		Service charges on deposit accounts		4,615		4,047
Insurance and retail brokerage commissions	Insurance and retail brokerage commissions	1,978		1,831		4,150		3,826		Insurance and retail brokerage commissions		2,272		2,172
Income from bank owned life insurance	Income from bank owned life insurance	1,509		1,800		3,460		3,416		Income from bank owned life insurance		1,508		1,951
Gain on sale of mortgage loans	Gain on sale of mortgage loans	3,084		4,243		8,130		6,789		Gain on sale of mortgage loans		1,282		5,046
Gain on sale of other loans and assets	Gain on sale of other loans and assets	2,111		581		3,801		1,280		Gain on sale of other loans and assets		2,319		1,690
Card-related interchange income	Card-related interchange income	7,406		5,886		13,833		11,148		Card-related interchange income		6,490		6,427
Derivatives mark to market	Derivatives mark to market	(277)		(221)		1,153		(1,962)		Derivatives mark to market		347		1,430

Swap fee income	Swap fee income	1,252		609		1,398		823		Swap fee income		453		146
Other income	Other income	1,997		1,680		3,921		3,487		Other income		1,975		1,924
Total noninterest income	Total noninterest income	26,086		21,812		53,441		41,085		Total noninterest income		23,976		27,355
Noninterest Expense	Noninterest Expense									Noninterest Expense
Salaries and employee benefits	Salaries and employee benefits	28,347		28,773		57,018		58,750		Salaries and employee benefits		30,932		28,671
Net occupancy	Net occupancy	3,881		4,397		8,654		9,370		Net occupancy		4,787		4,773
Furniture and equipment	Furniture and equipment	3,866		3,657		7,814		7,435		Furniture and equipment		3,730		3,948
Data processing	Data processing	3,192		2,596		6,244		5,063		Data processing		3,188		3,052
Advertising and promotion	Advertising and promotion	1,355		1,535		2,679		2,685		Advertising and promotion		1,226		1,324

Pennsylvania shares tax	Pennsylvania shares tax	1,258		1,254		2,090		1,992		Pennsylvania shares tax		1,005		832
Intangible amortization	Intangible amortization	863		919		1,729		1,853		Intangible amortization		862		866

Other professional fees and services	Other professional fees and services	1,091		920		1,842		1,818		Other professional fees and services		1,221		751
FDIC insurance	FDIC insurance	438		733		1,134		761		FDIC insurance		698		696
Loss on sale or write-down of assets	Loss on sale or write-down of assets	43		140		52		353		Loss on sale or write-down of assets		75		9

Litigation and operational losses	Litigation and operational losses	556		319		1,035		709		Litigation and operational losses		600		479

COVID-19 related	COVID-19 related	232		419		306		442		COVID-19 related		17		74

Branch consolidation	Branch consolidation	(22)		0		18		0		Branch consolidation		98		40
Other operating	Other operating	6,442		7,094		12,786		11,796		Other operating		7,285		6,344
Total noninterest expense	Total noninterest expense	51,542		52,756		103,401		103,027		Total noninterest expense		55,724		51,859
Income Before Income Taxes	Income Before Income Taxes	37,330		28,883		86,658		34,642		Income Before Income Taxes		34,460		49,328
Income tax provision	Income tax provision	7,711		5,032		17,269		6,064		Income tax provision		6,734		9,558
Net Income	Net Income	$	29,619	$	23,851	$	69,389	$	28,578	Net Income		$	27,726	$	39,770
Average Shares Outstanding	Average Shares Outstanding	96,012,828		97,932,333		96,019,808		98,027,980		Average Shares Outstanding		94,078,699		96,026,866

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

Table of Contents


Average Shares Outstanding Assuming Dilution	Average Shares Outstanding Assuming Dilution	96,282,425		98,146,854		96,255,475		98,254,429		Average Shares Outstanding Assuming Dilution	94,311,324		96,233,647

Per Share Data: Basic Earnings per Share	Per Share Data: Basic Earnings per Share	$	0.31	$	0.24	$	0.72	$	0.29	Per Share Data: Basic Earnings per Share	$	0.29	$	0.41
Diluted Earnings per Share	Diluted Earnings per Share	$	0.31	$	0.24	$	0.72	$	0.29	Diluted Earnings per Share	$	0.29	$	0.41
Cash Dividends Declared per Common Share	Cash Dividends Declared per Common Share	$	0.115	$	0.110	$	0.225	$	0.220	Cash Dividends Declared per Common Share	$	0.115	$	0.110

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Three Months Ended For the Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(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 period 1,707 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) income 917 4,170 (10,118) 15,943
Comprehensive Income $ 30,536 $ 28,021 $ 59,271 $ 44,521


	For the Three Months Ended
	March 31,
		2022		2021
		(dollars in thousands)
Net Income		$	27,726	$	39,770
Other comprehensive loss, before tax benefit:
Unrealized holding losses on securities arising during the period		(57,251)		(15,804)

Less: reclassification adjustment for gains on securities included in net income		(2)		(6)
Unrealized holding (losses) gains on derivatives arising during the period		(17,926)		1,842

Total other comprehensive loss, before tax benefit		(75,179)		(13,968)
Income tax benefit related to items of other comprehensive loss		15,787		2,933
Total other comprehensive loss		(59,392)		(11,035)
Comprehensive (Loss) Income		$	(31,666)	$	28,735

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)


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

Net income	Net income						69,389							69,389		Net income						27,726						27,726
Other comprehensive loss	Other comprehensive loss								(10,118)					(10,118)		Other comprehensive loss								(59,392)				(59,392)
Cash dividends declared ($0.225 per share)							(21,641)							(21,641)
Cash dividends declared ($0.115 per share)																Cash dividends declared ($0.115 per share)						(10,837)						(10,837)

Treasury stock acquired	Treasury stock acquired	(196,119)									(2,658)			(2,658)		Treasury stock acquired	(90,614)									(1,488)		(1,488)
Treasury stock reissued	Treasury stock reissued	173,907			771		0				1,493			2,264		Treasury stock reissued	157,251			499		—				1,448		1,947
Restricted stock	Restricted stock	93,089	0		445		0				121			566		Restricted stock	(750)	—		7		—				284		291

Balance at June 30, 2021		96,201,628	$	113,915	$	495,899	$	644,362	$	7,115	$	(154,872)		$	1,106,419
Balance at March 31, 2022																Balance at March 31, 2022	94,299,039	$	113,915	$	496,627	$	708,149	$	(68,160)	$	(182,912)	$	1,067,619


		Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock			Total Shareholders’ Equity			Shares Outstanding	Common Stock		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), net		Treasury Stock		Total Shareholders’ Equity
		(dollars in thousands, except share and per share data)											(dollars in thousands, except share and per share data)
Balance at December 31, 2019		98,311,840	$	113,915	$	493,737	$	577,348	$	5,579	$	(134,914)		$	1,055,665
Balance at December 31, 2020																Balance at December 31, 2020	96,130,751	$	113,915	$	494,683	$	596,614	$	17,233	$	(153,828)	$	1,068,617

Net income	Net income						28,578							28,578		Net income						39,770						39,770
Other comprehensive income									15,943					15,943
Cash dividends declared ($0.22 per share)							(21,614)							(21,614)
Other comprehensive loss																Other comprehensive loss								(11,035)				(11,035)
Cash dividends declared ($0.110 per share)																Cash dividends declared ($0.110 per share)						(10,578)						(10,578)

Treasury stock acquired	Treasury stock acquired	(430,896)									(5,220)			(5,220)		Treasury stock acquired	(123,395)									(1,643)		(1,643)
Treasury stock reissued	Treasury stock reissued	158,453			458		0				1,358			1,816		Treasury stock reissued	158,531			681		—				1,360		2,041
Restricted stock	Restricted stock	93,300	0		487		0				50			537		Restricted stock	82,589	—		356		—				(48)		308

Balance at June 30, 2020		98,132,697	$	113,915	$	494,682	$	584,312	$	21,522	$	(138,726)		$	1,075,705
Balance at March 31, 2021																Balance at March 31, 2021	96,248,476	$	113,915	$	495,720	$	625,806	$	6,198	$	(154,159)	$	1,087,480

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

Table of Contents

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

Shares
Outstanding Common
Stock Additional
Paid-in-
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss),
net Treasury
Stock Total
Shareholders’
Equity
(dollars in thousands, except share and per share data)
Balance at March 31, 2021 96,248,476 $ 113,915 $ 495,720 $ 625,806 $ 6,198 $ (154,159) $ 1,087,480
Net income 29,619 29,619
Other comprehensive income 917 917
Cash dividends declared ($0.115 per share) (11,063) (11,063)
Treasury stock acquired (72,724) (1,015) (1,015)
Treasury stock reissued 15,376 90 0 133 223
Restricted stock 10,500 0 89 0 169 258
Balance at June 30, 2021 96,201,628 $ 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, 2020 98,015,396 $ 113,915 $ 494,181 $ 571,256 $ 17,352 $ (138,780) $ 1,057,924
Net income 23,851 23,851
Other comprehensive income 4,170 4,170
Cash dividends declared ($0.110 per share) (10,795) (10,795)
Treasury stock acquired 0 — 0 0
Treasury stock reissued 24,001 14 0 208 222
Restricted stock 93,300 0 487 0 (154) 333
Balance at June 30, 2020 98,132,697 $ 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.~~

~~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 Six Months Ended					For the Three Months Ended
		June 30,					March 31,
		2021		2020			2022		2021
Operating Activities	Operating Activities	(dollars in thousands)				Operating Activities	(dollars in thousands)
Net income	Net income	$	69,389	$	28,578	Net income	$	27,726	$	39,770
Adjustment to reconcile net income to net cash provided by operating activities:	Adjustment to reconcile net income to net cash provided by operating activities:					Adjustment to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	1,023		37,826		Provision for credit losses	1,964		(4,390)
Deferred tax expense (benefit)		2,863		(3,387)
Deferred tax expense						Deferred tax expense	1,807		3,859
Depreciation and amortization	Depreciation and amortization	5,931		5,549		Depreciation and amortization	2,560		3,003
Net gains on securities and other assets	Net gains on securities and other assets	(13,205)		(5,896)		Net gains on securities and other assets	(3,908)		(8,452)
Net amortization of premiums and discounts on securities	Net amortization of premiums and discounts on securities	2,588		2,993		Net amortization of premiums and discounts on securities	635		1,268

Income from increase in cash surrender value of bank owned life insurance	Income from increase in cash surrender value of bank owned life insurance	(3,132)		(3,149)		Income from increase in cash surrender value of bank owned life insurance	(1,508)		(1,621)
Decrease (increase) in interest receivable		3,697		(10,218)
Decrease in interest receivable						Decrease in interest receivable	45		1,899
Mortgage loans originated for sale	Mortgage loans originated for sale	(210,746)		(155,916)		Mortgage loans originated for sale	(51,833)		(121,280)
Proceeds from sale of mortgage loans	Proceeds from sale of mortgage loans	231,321		150,821		Proceeds from sale of mortgage loans	58,198		140,780
Decrease in interest payable		(357)		(484)
Increase in interest payable						Increase in interest payable	1,282		1,128
(Decrease) increase in income taxes payable	(Decrease) increase in income taxes payable	(1,870)		9,349		(Decrease) increase in income taxes payable	(4,137)		5,626

Other-net	Other-net	(14,178)		(4,875)		Other-net	(1,632)		(10,360)
Net cash provided by operating activities	Net cash provided by operating activities	73,324		51,191		Net cash provided by operating activities	31,199		51,230
Investing Activities	Investing Activities					Investing Activities
Transactions with securities held to maturity:	Transactions with securities held to maturity:					Transactions with securities held to maturity:
Proceeds from maturities and redemptions	Proceeds from maturities and redemptions	59,170		42,175		Proceeds from maturities and redemptions	28,369		28,936
Purchases	Purchases	(312,247)		(200)		Purchases	(200)		(135,130)
Transactions with securities available for sale:	Transactions with securities available for sale:					Transactions with securities available for sale:

Proceeds from maturities and redemptions	Proceeds from maturities and redemptions	285,216		125,162		Proceeds from maturities and redemptions	50,521		206,993
Purchases	Purchases	(560,180)		(127,368)		Purchases	—		(435,563)
Purchases of FHLB stock	Purchases of FHLB stock	(2,134)		(20,927)		Purchases of FHLB stock	(505)		(1,558)
Proceeds from the redemption of FHLB stock	Proceeds from the redemption of FHLB stock	2,834		25,416		Proceeds from the redemption of FHLB stock	201		340
Proceeds from bank owned life insurance	Proceeds from bank owned life insurance	3,097		201		Proceeds from bank owned life insurance	—		2,931
Proceeds from sale of loans	Proceeds from sale of loans	33,824		10,335		Proceeds from sale of loans	21,767		15,483
Proceeds from sale of other assets	Proceeds from sale of other assets	4,979		3,173		Proceeds from sale of other assets	1,461		2,226

Net increase in loans		(17,885)		(752,191)
Net (increase) decrease in loans and leases						Net (increase) decrease in loans and leases	(133,137)		2,970

Purchases of premises and equipment and other assets	Purchases of premises and equipment and other assets	(3,909)		(5,363)		Purchases of premises and equipment and other assets	(4,419)		(2,322)
Net cash used in investing activities	Net cash used in investing activities	(507,235)		(699,587)		Net cash used in investing activities	(35,942)		(314,694)
Financing Activities	Financing Activities					Financing Activities

Net decrease in other short-term borrowings	Net decrease in other short-term borrowings	(10,001)		(93,369)		Net decrease in other short-term borrowings	(42,566)		(6,611)
Net increase in deposits	Net increase in deposits	446,426		1,104,794		Net increase in deposits	189,364		430,633
Repayments of other long-term debt	Repayments of other long-term debt	(50,339)		(327)		Repayments of other long-term debt	(175)		(169)
Repayments of capital lease obligation	Repayments of capital lease obligation	(230)		(213)		Repayments of capital lease obligation	(122)		(115)

Dividends paid	Dividends paid	(21,641)		(21,614)		Dividends paid	(10,837)		(10,578)
Proceeds from reissuance of treasury stock		222		222

Purchase of treasury stock	Purchase of treasury stock	(2,654)		(5,220)		Purchase of treasury stock	(1,488)		(1,643)

Net cash provided by financing activities	Net cash provided by financing activities	361,783		984,273		Net cash provided by financing activities	134,176		411,517
Net (decrease) increase in cash and cash equivalents		(72,128)		335,877
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	129,433		148,053
Cash and cash equivalents at January 1	Cash and cash equivalents at January 1	356,581		121,856		Cash and cash equivalents at January 1	395,372		356,581
Cash and cash equivalents at June 30		$	284,453	$	457,733
Cash and cash equivalents at March 31						Cash and cash equivalents at March 31	$	524,805	$	504,634

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

The accounting and reporting policies of First Commonwealth Financial Corporation and 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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the full year of ~~2021.~~2022. These interim financial statements should be read in conjunction with First Commonwealth’s ~~2020~~2021 Annual Report on Form 10-K.

Note 2 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 Six Months Ended June 30,
2021 2020
Pretax Amount Tax (Expense) Benefit Net of Tax Amount Pretax Amount Tax (Expense) Benefit Net of Tax Amount
(dollars in thousands)
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains on securities arising during the period $ (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 period 1,305 (274) 1,031 (5,117) 1,075 (4,042)
Reclassification adjustment for losses on derivatives included in net income 0 0 0 0 0 0
Total unrealized gains (losses) on derivatives 1,305 (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


	For the Three Months Ended March 31,
	2022						2021
	Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount		Pretax Amount		Tax (Expense) Benefit		Net of Tax Amount
	(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period	$	(57,251)	$	12,023	$	(45,228)	$	(15,804)	$	3,319	$	(12,485)

Reclassification adjustment for gains on securities included in net income	(2)		—		(2)		(6)		1		(5)
Total unrealized losses on securities	(57,253)		12,023		(45,230)		(15,810)		3,320		(12,490)
Unrealized (losses) gains on derivatives:
Unrealized holding (losses) gains on derivatives arising during the period	(17,926)		3,764		(14,162)		1,842		(387)		1,455

Total unrealized (losses) gains on derivatives	(17,926)		3,764		(14,162)		1,842		(387)		1,455




Total other comprehensive loss	$	(75,179)	$	15,787	$	(59,392)	$	(13,968)	$	2,933	$	(11,035)

109

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 2020
Pretax Amount Tax (Expense) Benefit Net of Tax Amount Pretax Amount Tax (Expense) Benefit Net 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 securities 1,697 (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 income 0 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 six months ended June 30:~~

2021 2020
Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss) Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss)
(dollars in thousands)
Balance at December 31 $ 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

The following table details the change in components of OCI for the three months ended ~~June 30:~~March 31:


	2022								2021
	Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)		Securities Available for Sale		Post-Retirement Obligation		Derivatives		Accumulated Other Comprehensive Income (Loss)
	(dollars in thousands)
Balance at December 31	$	(3,317)	$	95	$	(5,546)	$	(8,768)	$	20,310	$	(182)	$	(2,895)	$	17,233


Other comprehensive loss before reclassification adjustment	(45,228)		—		(14,162)		(59,390)		(12,485)		—		1,455		(11,030)
Amounts reclassified from accumulated other comprehensive (loss) income	(2)		—		—		(2)		(5)		—		—		(5)
Net other comprehensive loss during the period	(45,230)		—		(14,162)		(59,392)		(12,490)		—		1,455		(11,035)
Balance at March 31	$	(48,547)	$	95	$	(19,708)	$	(68,160)	$	7,820	$	(182)	$	(1,440)	$	6,198

2021 2020
Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss) Securities Available for Sale Post-Retirement Obligation Derivatives Accumulated Other Comprehensive Income (Loss)
(dollars in thousands)
Balance at March 31 $ 7,820 $ (182) $ (1,440) $ 6,198 $ 19,972 $ 365 $ (2,985) $ 17,352
Other comprehensive income before reclassification adjustment 1,349 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 period 1,341 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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Note 3 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 ~~six~~three months ended ~~June 30:~~March 31:


		2021		2020			2022		2021
		(dollars in thousands)					(dollars in thousands)
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	8,800	$	20,493	Interest	$	1,755	$	3,483
Income taxes	Income taxes	16,209		130		Income taxes	9,020		32
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:

Loans transferred to other real estate owned and repossessed assets	Loans transferred to other real estate owned and repossessed assets	1,649		2,368		Loans transferred to other real estate owned and repossessed assets	647		944
Loans transferred from held to maturity to held for sale	Loans transferred from held to maturity to held for sale	30,704		13,442		Loans transferred from held to maturity to held for sale	18,627		17,749

Loans transferred from available for sale to held to maturity		0		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 derivatives		1,305		(5,117)
Investments committed to purchase, not settled		0		21,853

Gross decrease in market value adjustment to securities available for sale						Gross decrease in market value adjustment to securities available for sale	(57,254)		(15,810)
Gross (decrease) increase in market value adjustment to derivatives						Gross (decrease) increase in market value adjustment to derivatives	(17,926)		1,842

Noncash treasury stock reissuance	Noncash treasury stock reissuance	2,042		1,594		Noncash treasury stock reissuance	1,947		2,041

Unsettled treasury stock repurchases		4		0

Proceeds from death benefit on bank owned life insurance not received	Proceeds from death benefit on bank owned life insurance not received	(384)		557		Proceeds from death benefit on bank owned life insurance not received	397		(384)

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4 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,					For the Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Weighted average common shares issued	Weighted average common shares issued	113,914,902		113,914,902		113,914,902		113,914,902		Weighted average common shares issued		113,914,902		113,914,902
Average treasury stock shares	Average treasury stock shares	(17,695,829)		(15,788,359)		(17,707,057)		(15,730,604)		Average treasury stock shares		(19,654,309)		(17,718,410)
Average deferred compensation shares	Average deferred compensation shares	(55,582)		(41,426)		(55,563)		(39,939)		Average deferred compensation shares		(55,684)		(55,544)
Average unearned nonvested shares	Average unearned nonvested shares	(150,663)		(152,784)		(132,474)		(116,379)		Average unearned nonvested shares		(126,210)		(114,082)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share	Weighted average common shares and common stock equivalents used to calculate basic earnings per share	96,012,828		97,932,333		96,019,808		98,027,980		Weighted average common shares and common stock equivalents used to calculate basic earnings per share		94,078,699		96,026,866
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share	Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share	213,982		173,095		180,052		185,023		Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share		176,913		151,200
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share	55,615		41,426		55,615		41,426		Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share		55,712		55,581

Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	96,282,425		98,146,854		96,255,475		98,254,429		Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		94,311,324		96,233,647
Basic Earnings per Share	Basic Earnings per Share	$	0.31	$	0.24	$	0.72	$	0.29	Basic Earnings per Share		$	0.29	$	0.41
Diluted Earnings per Share	Diluted Earnings per Share	$	0.31	$	0.24	$	0.72	$	0.29	Diluted Earnings per Share		$	0.29	$	0.41

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 ~~six~~three months ended ~~June 30~~March 31 because to do so would have been antidilutive.


		2021					2020						2022					2021
			Price Range					Price Range						Price Range					Price Range
		Shares	From		To		Shares	From		To			Shares	From		To		Shares	From		To

Restricted Stock	Restricted Stock	66,092	$	13.72	$	14.58	122,066	$	13.72	$	15.44	Restricted Stock	23,621	$	15.81	$	16.25	79,497	$	13.72	$	14.22
Restricted Stock Units	Restricted Stock Units	26,343	$	16.41	$	16.41	91,240	$	12.43	$	15.37	Restricted Stock Units	12,793	$	21.08	$	21.08	16,730	$	16.41	$	16.41

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Note 5 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:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(dollars in thousands)					(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:	Financial instruments whose contract amounts represent credit risk:					Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	Commitments to extend credit	$	2,195,786	$	2,097,628	Commitments to extend credit	$	2,376,865	$	2,353,991
Financial standby letters of credit	Financial standby letters of credit	18,514		15,988		Financial standby letters of credit	17,985		18,824
Performance standby letters of credit	Performance standby letters of credit	16,545		16,864		Performance standby letters of credit	17,584		10,663
Commercial letters of credit	Commercial letters of credit	965		783		Commercial letters of credit	975		975

The notional amounts outstanding as of ~~June 30, 2021~~March 31, 2022 include amounts issued in ~~2021~~2022 of ~~$0.5~~$7.0 million in performance standby letters of ~~credit and $0.1 million in~~credit. There were no financial standby letters of ~~credit. There were 0~~credit or commercial letters of credit issued in ~~2021.~~2022, however there was a change in terms for one letter of credit which increased its commitment amount. A liability of $0.1 million has been

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recorded as of both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, which represents the estimated fair value of letters of credit issued. The fair value of letters of credit is estimated based on the unrecognized portion of fees received at the time the commitment was issued.

Unused commitments and letters of credit provide exposure to future credit loss in the event of nonperformance by the borrower or guaranteed parties. Management’s evaluation of the credit risk related to these commitments resulted in the recording of a liability of ~~$5.5~~$8.6 million and ~~$7.4~~$6.4 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporates the expected loss percentage calculated for comparable loan categories as part of the allowance for credit losses for loans as well as estimated utilization for each loan category.

Legal Proceedings

First Commonwealth and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. As of ~~June 30, 2021,~~March 31, 2022, 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 a putative class action that commenced on October 14, 2020 in the Court of Common Pleas of Allegheny County, Pennsylvania. The claims related to certain notices and other practices in connection with the repossession of motor vehicles. On May 4, 2021, the Court granted the Bank’s preliminary objections and dismissed the plaintiffs’ complaint with prejudice. The plaintiffs have filed a notice of appeal

Note 6 Investment Securities

Securities Available for Sale

Below is an analysis of the ~~Court’s order dismissing the complaint.~~amortized cost and estimated fair values of securities available for sale at:


	March 31, 2022								December 31, 2021
	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	$	4,884	$	198	$	(16)	$	5,066	$	5,242	$	420	$	—	$	5,662
Mortgage-Backed Securities – Commercial	350,918		25		(21,715)		329,228		365,024		1,725		(4,459)		362,290
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	596,272		504		(39,517)		557,259		632,687		6,308		(9,021)		629,974

Other Government-Sponsored Enterprises	1,000		—		(65)		935		1,000		—		(19)		981
Obligations of States and Political Subdivisions	9,515		21		(614)		8,922		9,538		89		(103)		9,524
Corporate Securities	32,068		488		(762)		31,794		32,088		973		(112)		32,949



Total Securities Available for Sale	$	994,657	$	1,236	$	(62,689)	$	933,204	$	1,045,579	$	9,515	$	(13,714)	$	1,041,380

1312

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 6 Investment Securities~~

~~Securities Available for Sale~~

~~Below is an analysis of the amortized cost and estimated fair values of securities available for sale at:~~
June 30, 2021 December 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 – Commercial 326,712 4,296 (540) 330,468 182,823 8,357 0 191,180
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential 712,715 10,398 (4,486) 718,627 481,109 14,924 0 496,033
Other Government-Sponsored Enterprises 1,000 0 (10) 990 100,996 2 0 100,998
Obligations of States and Political Subdivisions 9,609 131 (59) 9,681 11,154 243 0 11,397
Corporate Securities 23,126 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.

~~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 ~~June 30, 2021,~~March 31, 2022, by contractual maturity, are shown below.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(dollars in thousands)					(dollars in thousands)
Due within 1 year	Due within 1 year	$	5,000	$	5,058	Due within 1 year	$	4,998	$	5,053
Due after 1 but within 5 years	Due after 1 but within 5 years	12,871		13,610		Due after 1 but within 5 years	8,878		8,915
Due after 5 but within 10 years	Due after 5 but within 10 years	15,864		16,440		Due after 5 but within 10 years	28,707		27,683
Due after 10 years	Due after 10 years	0		0		Due after 10 years	—		—
		33,735		35,108			42,583		41,651
Mortgage-Backed Securities (a)	Mortgage-Backed Securities (a)	1,045,199		1,055,422		Mortgage-Backed Securities (a)	952,074		891,553
Total Debt Securities	Total Debt Securities	$	1,078,934	$	1,090,530	Total Debt Securities	$	994,657	$	933,204

(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 ~~$332.5~~$355.8 million and a fair value of ~~$336.8~~$334.3 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of ~~$712.7~~$596.3 million and a fair value of ~~$718.6~~$557.3 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Proceeds from sales, gross gains (losses) realized on sales and maturities related to securities held to maturity and securities available for sale were as follows for the ~~six~~three months ended ~~June 30:~~March 31:


		2021		2020			2022		2021
		(dollars in thousands)					(dollars in thousands)
Proceeds from sales	Proceeds from sales	$	0	$	0	Proceeds from sales	$	—	$	—
Gross gains (losses) realized:	Gross gains (losses) realized:					Gross gains (losses) realized:
Sales transactions:	Sales transactions:					Sales transactions:
Gross gains	Gross gains	$	0	$	0	Gross gains	$	—	$	—
Gross losses	Gross losses	0		0		Gross losses	—		—
		0		0			—		—
Maturities	Maturities					Maturities
Gross gains	Gross gains	16		27		Gross gains	2		6
Gross losses	Gross losses	0		0		Gross losses	—		—

		16		27			2		6
Net gains and impairment		$	16	$	27
Net gains						Net gains	$	2	$	6

Securities available for sale with an estimated fair value of ~~$838.4~~$675.5 million and ~~$792.1~~$759.1 million were pledged as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, to secure public deposits and for other purposes required or permitted by law.

1513

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, 2021								December 31, 2020									March 31, 2022								December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
		(dollars in thousands)																	(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:																	Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	$	2,652	$	128	$	0	$	2,780	$	2,766	$	138	$	0	$	2,904	Mortgage-Backed Securities – Residential	$	2,305	$	—	$	(41)	$	2,264	$	2,409	$	101	$	—	$	2,510
Mortgage-Backed Securities- Commercial	Mortgage-Backed Securities- Commercial	102,982		818		(728)		103,072		36,799		1,441		0		38,240		Mortgage-Backed Securities- Commercial	86,281		—		(6,284)		79,997		91,439		305		(1,939)		89,805
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:																	Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	384,392		3,712		(2,645)		385,459		277,351		5,389		(10)		282,730		Mortgage-Backed Securities – Residential	366,380		76		(26,251)		340,205		387,848		2,800		(5,758)		384,890
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	8,527		275		0		8,802		9,737		344		0		10,081		Mortgage-Backed Securities – Commercial	6,672		8		—		6,680		7,309		148		—		7,457
Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	21,747		0		(452)		21,295		0		0		0		0		Other Government-Sponsored Enterprises	21,983		—		(2,124)		19,859		21,904		—		(625)		21,279
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	32,925		566		(79)		33,412		34,391		705		0		35,096		Obligations of States and Political Subdivisions	28,290		76		(1,272)		27,094		29,402		414		(103)		29,713
Debt Securities Issued by Foreign Governments	Debt Securities Issued by Foreign Governments	1,000		0		0		1,000		800		0		0		800		Debt Securities Issued by Foreign Governments	1,000		—		(11)		989		1,000		—		(3)		997

Total Securities Held to Maturity	Total Securities Held to Maturity	$	554,225	$	5,499	$	(3,904)	$	555,820	$	361,844	$	8,017	$	(10)	$	369,851	Total Securities Held to Maturity	$	512,911	$	160	$	(35,983)	$	477,088	$	541,311	$	3,768	$	(8,428)	$	536,651

The amortized cost and estimated fair value of debt securities held to maturity at ~~June 30, 2021,~~March 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(dollars in thousands)					(dollars in thousands)
Due within 1 year	Due within 1 year	$	3,465	$	3,481	Due within 1 year	$	706	$	709
Due after 1 but within 5 years	Due after 1 but within 5 years	4,772		4,826		Due after 1 but within 5 years	7,007		6,997
Due after 5 but within 10 years	Due after 5 but within 10 years	43,634		43,558		Due after 5 but within 10 years	42,998		39,752
Due after 10 years	Due after 10 years	3,801		3,842		Due after 10 years	562		484
		55,672		55,707			51,273		47,942
Mortgage-Backed Securities (a)	Mortgage-Backed Securities (a)	498,553		500,113		Mortgage-Backed Securities (a)	461,638		429,146
Total Debt Securities	Total Debt Securities	$	554,225	$	555,820	Total Debt Securities	$	512,911	$	477,088

(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 ~~$105.6~~$88.6 million and a fair value of ~~$105.9~~$82.3 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of ~~$392.9~~$373.0 million and a fair value of ~~$394.3~~$346.9 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 ~~$348.8~~$347.6 million and ~~$228.1~~$313.9 million were pledged as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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

1614

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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our FHLB stock totaled ~~$9.9~~$12.0 million and ~~$10.6~~$11.7 million, respectively, and is included in “Other investments” on the unaudited Consolidated Statements of Financial Condition.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities during the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022.

As of both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, "Other investments" also includes ~~$1.7~~$1.2 million in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the three-months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ there were 0no gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.

Impairment of Investment Securities

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

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

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

are more likely than not to sell debt securities based upon our investment strategy for the particular type of security and our

cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. Held-to-maturity securities are

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

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

included in earnings as a component of credit loss expense.

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

The following table presents the gross unrealized losses and estimated fair values at ~~June 30, 2021~~March 31, 2022 for both available for sale and held to maturity securities by investment category and time frame for which securities have been in a continuous unrealized loss position:


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

Mortgage-Backed Securities – Residential															Mortgage-Backed Securities – Residential	$	4,672	$	(57)	$	—	$	—	$	4,672	$	(57)
Mortgage-Backed Securities – Commercial	Mortgage-Backed Securities – Commercial	$	191,215	$	(1,268)	$	0	$	0	$	191,215		$	(1,268)	Mortgage-Backed Securities – Commercial	355,202		(24,189)		42,690		(3,810)		397,892		(27,999)
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:														Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	520,020		(7,131)		0		0		520,020			(7,131)		Mortgage-Backed Securities – Residential	622,340		(36,828)		254,048		(28,940)		876,388		(65,768)

Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	22,285		(462)		0		0		22,285			(462)		Other Government-Sponsored Enterprises	—		—		20,794		(2,189)		20,794		(2,189)
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	7,237		(138)		0		0		7,237			(138)		Obligations of States and Political Subdivisions	21,606		(1,618)		2,637		(268)		24,243		(1,886)

Debt Securities Issued by Foreign Governments															Debt Securities Issued by Foreign Governments	589		(11)		—		—		589		(11)
Corporate Securities	Corporate Securities	5,136		(39)		0		0		5,136			(39)		Corporate Securities	13,311		(688)		5,027		(74)		18,338		(762)

Total Securities	Total Securities	$	745,893	$	(9,038)	$	0	$	0	$	745,893		$	(9,038)	Total Securities	$	1,017,720	$	(63,391)	$	325,196	$	(35,281)	$	1,342,916	$	(98,672)

At ~~June 30, 2021,~~March 31, 2022, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised ~~98%~~97% of total unrealized losses. All unrealized losses ~~due to~~are the result of changes in market interest rates. At ~~June 30, 2021,~~March 31, 2022, there are 44165 debt securities in an unrealized loss position.

1715

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, ~~2020~~2021 by investment category and time frame for which securities have been in a continuous unrealized loss position:


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

Mortgage-Backed Securities - Commercial															Mortgage-Backed Securities - Commercial	$	320,414	$	(6,398)	$	—	$	—	$	320,414	$	(6,398)
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:														Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	Mortgage-Backed Securities – Residential	$	3,755	$	(10)	$	0	$	0	$	3,755		$	(10)	Mortgage-Backed Securities – Residential	658,965		(14,779)		—		—		658,965		(14,779)

Other Government-Sponsored Enterprises															Other Government-Sponsored Enterprises	22,261		(644)		—		—		22,261		(644)
Obligation of States and Political Subdivisions															Obligation of States and Political Subdivisions	11,213		(206)		—		—		11,213		(206)
Debt Securities Issued by Foreign Governments															Debt Securities Issued by Foreign Governments	997		(3)		—		—		997		(3)
Corporate Securities															Corporate Securities	19,013		(112)		—		—		19,013		(112)

Total Securities	Total Securities	$	3,755	$	(10)	$	0	$	0	$	3,755		$	(10)	Total Securities	$	1,032,863	$	(22,142)	$	—	$	—	$	1,032,863	$	(22,142)

As of ~~June 30, 2021,~~March 31, 2022, our corporate securities had an amortized cost and an estimated fair value of ~~$23.1~~$32.1 million and ~~$24.4~~$31.8 million, respectively. As of December 31, ~~2020,~~2021, our corporate securities had an amortized cost and estimated fair value of ~~$22.9~~$32.1 million and ~~$24.4~~$32.9 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There ~~was 1~~were 4 corporate ~~security~~securities in an unrealized loss position as of ~~June 30, 2021~~March 31, 2022 and ~~NaN as of~~ December 31, ~~2020.~~2021. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether the unrealized loss position is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.

There was 0no expected credit related impairment recognized on investment securities during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 Loans and Leases and Allowance for Credit Losses

Loans and leases are presented in the Consolidated Statements of Financial Condition net of deferred fees and costs, and discounts related to purchased loans. Net deferred fees were ~~$7.1~~$2.9 million and ~~$6.0~~$0.8 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, and discounts on purchased loans were ~~$6.5 million and $7.0~~$6.0 million at both March 31, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021. The following table provides outstanding balances related to each of our loan types:


		June 30, 2021		December 31, 2020				March 31, 2022		December 31, 2021

		(dollars in thousands)					(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	1,374,177	$	1,555,986	Commercial, financial, agricultural and other		$	1,123,690	$	1,173,452
Time and demand	Time and demand	1,360,065		1,541,382		Time and demand		992,477		1,159,524

Commercial credit cards	Commercial credit cards	14,112		14,604		Commercial credit cards		13,675		13,928
Equipment finance						Equipment finance		2,505
Time and demand other						Time and demand other		115,033
Real estate construction	Real estate construction	414,816		427,221		Real estate construction		398,988		494,456
Construction other						Construction other		307,411
Construction residential						Construction residential		91,577
Residential real estate	Residential real estate	1,828,783		1,750,592		Residential real estate		2,006,221		1,920,250
Residential first lien	Residential first lien	1,218,300		1,144,323		Residential first lien		1,381,742		1,299,534
Residential junior lien/home equity	Residential junior lien/home equity	610,483		606,269		Residential junior lien/home equity		624,479		620,716
Commercial real estate	Commercial real estate	2,205,758		2,211,569		Commercial real estate		2,344,281		2,251,097
Multifamily	Multifamily	385,905		371,239		Multifamily		401,581		385,432
Nonowner occupied	Nonowner occupied	1,429,192		1,421,151		Nonowner occupied		1,516,518		1,465,247
Owner occupied	Owner occupied	390,661		419,179		Owner occupied		426,182		400,418
Loans to individuals	Loans to individuals	917,001		815,815		Loans to individuals		1,078,932		999,975
Automobile		829,150		712,800
Automobile and recreational vehicles						Automobile and recreational vehicles		984,001		901,280
Consumer credit cards	Consumer credit cards	10,834		12,360		Consumer credit cards		10,675		11,151
Consumer other	Consumer other	77,017		90,655		Consumer other		84,256		87,544
Total loans		$	6,740,535	$	6,761,183
Total loans and leases						Total loans and leases		$	6,952,112	$	6,839,230

In the table above, Commercial, financial, agricultural and other loans at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 includes ~~$292.4~~$28.9 million and ~~$478.9~~$71.3 million, respectively, in Paycheck Protection Program ("PPP") loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully

~~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~~fourteen portfolio segments. The composition of loans by portfolio segment includes:

Commercial, financial, agricultural and other

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

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equipment Finance - Consists of loans and leases to finance the purchase of equipment for commercial customers. The risk and loss characteristics are unique for this group due to the type of collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. There were no equipment finance loans or leases in the portfolio prior to the first quarter of 2022.

Time & Demand Other - Consists primarily of loans to state and political subdivisions and other commercial loans that have different characteristics than loans in the Time and Demand category. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of household debt to income and economic conditions measured by GDP. Prior to the first quarter of 2022, these loans were included in the Time and Demand category. The breakout into a separate category is the result of an annual review of the peer group loss history and loss drivers used in the Allowance for Credit Losses model.

Real estate construction

~~Includes both 1-4~~Construction Other - Consists of construction loans to commercial builders and developers and are secured by the properties under development.

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

The risk and loss characteristics of ~~the~~these two construction ~~category~~categories are different than other real estate secured categories due to the collateral being at various stages of completion. The nature of the project and type of borrower of the two construction categories provides for unique risk and loss characteristics for each category. The primary macroeconomic drivers for estimating credit losses for ~~this category~~construction loans include forecasts of national unemployment and measures of completed construction projects. Prior to the first quarter of 2022, all construction loans were included in one loan category. The breakout into separate construction categories is the result of an annual review of the peer group loss history and loss drivers used in the Allowance for Credit Losses model.

Residential real estate

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

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

Commercial real estate

Multifamily - Consists of loans secured by commercial multifamily properties. Real estate related to rentals to consumers ~~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 national unemployment. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, national unemployment replaced rental ~~vacancy.~~vacancy as one of the primary macroeconomic drivers in this category.

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

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Loans to individuals

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Other Consumer - Consists of lines of credit, student loans and other consumer loans, not secured by real estate or autos. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and retail sales. In the ~~level~~first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, retail sales replaced household ~~debt.~~debt as one of the primary macroeconomic factors for this category.

The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally 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~~the beginning of the forecast period was ~~5.76%~~3.87% and during the one-year forecast period it was projected to average ~~5.37%~~4.36%, with a peak of ~~5.76%~~4.58%. Current forecast assumptions consider the impact of rising interest rates, global oil prices and supply chain disruption, COVID-19, Russia's invasion of Ukraine and the potential effects of these on the US economy.

Credit Quality Information

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


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

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

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

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

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

The following tables represent our credit risk profile by creditworthiness:

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	March 31, 2022
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,090,034	$	15,396	$	18,260	$	—	$	—	$	33,656	$	1,123,690
Time and demand	959,190		15,396		17,891		—		—		33,287		992,477
Commercial credit cards	13,675		—		—		—		—		—		13,675
Equipment finance	2,505		—		—		—		—		—		2,505
Time and demand other	114,664		—		369		—		—		369		115,033
Real estate construction	398,233		281		474		—		—		755		398,988
Construction other	306,937		—		474		—		—		474		307,411
Construction residential	91,296		281		—		—		—		281		91,577
Residential real estate	1,999,616		523		6,082		—		—		6,605		2,006,221
Residential first lien	1,378,124		455		3,163		—		—		3,618		1,381,742
Residential junior lien/home equity	621,492		68		2,919		—		—		2,987		624,479
Commercial real estate	2,211,496		82,590		50,195		—		—		132,785		2,344,281
Multifamily	361,021		25,588		14,972		—		—		40,560		401,581
Nonowner occupied	1,434,603		52,231		29,684		—		—		81,915		1,516,518
Owner occupied	415,872		4,771		5,539		—		—		10,310		426,182
Loans to individuals	1,078,673		—		259		—		—		259		1,078,932
Automobile and recreational vehicles	983,838		—		163		—		—		163		984,001
Consumer credit cards	10,675		—		—		—		—		—		10,675
Consumer other	84,160		—		96		—		—		96		84,256
Total loans and leases	$	6,778,052	$	98,790	$	75,270	$	—	$	—	$	174,060	$	6,952,112

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~The following tables represent our credit risk profile by creditworthiness:~~

June 30, 2021
Non-Pass
Pass OAEM Substandard Doubtful Loss Total Non-Pass Total
(dollars in thousands)
Commercial, financial, agricultural and other $ 1,329,974 $ 28,567 $ 15,636 $ 0 $ 0 $ 44,203 $ 1,374,177
Time and demand 1,315,862 28,567 15,636 0 0 44,203 1,360,065
Commercial credit cards 14,112 0 0 0 0 0 14,112
Real estate construction 413,059 1,703 54 0 0 1,757 414,816
Residential real estate 1,820,506 1,531 6,746 0 0 8,277 1,828,783
Residential first lien 1,213,599 1,457 3,244 0 0 4,701 1,218,300
Residential junior lien/home equity 606,907 74 3,502 0 0 3,576 610,483
Commercial real estate 2,009,839 162,669 33,250 0 0 195,919 2,205,758
Multifamily 370,681 14,703 521 0 0 15,224 385,905
Nonowner occupied 1,263,952 138,440 26,800 0 0 165,240 1,429,192
Owner occupied 375,206 9,526 5,929 0 0 15,455 390,661
Loans to individuals 916,730 0 271 0 0 271 917,001
Automobile 828,936 0 214 0 0 214 829,150
Consumer credit cards 10,834 0 0 0 0 0 10,834
Consumer other 76,960 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															December 31, 2021
				Non-Pass															Non-Pass
		Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total			Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
		(dollars in thousands)															(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	1,491,916	$	48,233	$	15,837	$	0	$	0	$	64,070	$	1,555,986	Commercial, financial, agricultural and other	$	1,121,234	$	33,765	$	18,453	$	—	$	—	$	52,218	$	1,173,452
Time and demand	Time and demand	1,477,312		48,233		15,837		0		0		64,070		1,541,382		Time and demand	1,107,306		33,765		18,453		—		—		52,218		1,159,524
Commercial credit cards	Commercial credit cards	14,604		0		0		0		0		0		14,604		Commercial credit cards	13,928		—		—		—		—		—		13,928
Real estate construction	Real estate construction	426,663		504		54		0		0		558		427,221		Real estate construction	493,913		498		45		—		—		543		494,456
Residential real estate	Residential real estate	1,740,992		1,902		7,698		0		0		9,600		1,750,592		Residential real estate	1,913,064		976		6,210		—		—		7,186		1,920,250
Residential first lien	Residential first lien	1,138,409		1,780		4,134		0		0		5,914		1,144,323		Residential first lien	1,295,524		905		3,105		—		—		4,010		1,299,534
Residential junior lien/home equity	Residential junior lien/home equity	602,583		122		3,564		0		0		3,686		606,269		Residential junior lien/home equity	617,540		71		3,105		—		—		3,176		620,716
Commercial real estate	Commercial real estate	1,983,258		175,995		52,316		0		0		228,311		2,211,569		Commercial real estate	2,113,123		85,324		52,650		—		—		137,974		2,251,097
Multifamily	Multifamily	369,883		131		1,225		0		0		1,356		371,239		Multifamily	355,702		14,565		15,165		—		—		29,730		385,432
Nonowner occupied	Nonowner occupied	1,216,252		161,336		43,563		0		0		204,899		1,421,151		Nonowner occupied	1,368,922		63,783		32,542		—		—		96,325		1,465,247
Owner occupied	Owner occupied	397,123		14,528		7,528		0		0		22,056		419,179		Owner occupied	388,499		6,976		4,943		—		—		11,919		400,418
Loans to individuals	Loans to individuals	815,541		0		274		0		0		274		815,815		Loans to individuals	999,770		—		205		—		—		205		999,975
Automobile		712,539		0		261		0		0		261		712,800
Automobile and recreational vehicles																Automobile and recreational vehicles	901,132		—		148		—		—		148		901,280
Consumer credit cards	Consumer credit cards	12,360		0		0		0		0		0		12,360		Consumer credit cards	11,151		—		—		—		—		—		11,151
Consumer other	Consumer other	90,642		0		13		0		0		13		90,655		Consumer other	87,487		—		57		—		—		57		87,544
Total loans		$	6,458,370	$	226,634	$	76,179	$	0	$	0	$	302,813	$	6,761,183
Total loans and leases																Total loans and leases	$	6,641,104	$	120,563	$	77,563	$	—	$	—	$	198,126	$	6,839,230

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~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 Loans Revolving Loans
2021 2020 2019 2018 2017 Prior Total
(dollars in thousands)
Time and demand $ 335,532 $ 188,651 $ 160,849 $ 109,102 $ 59,017 $ 133,929 $ 372,985 $ 1,360,065
Pass 335,532 188,552 149,819 108,430 52,920 118,387 362,222 1,315,862
OAEM 0 89 10,943 135 2,147 7,373 7,880 28,567
Substandard 0 10 87 537 3,950 8,169 2,883 15,636
Commercial credit cards 0 0 0 0 0 0 14,112 14,112
Pass 0 0 0 0 0 0 14,112 14,112
Real estate construction 42,696 172,170 137,732 49,029 10,255 1,799 1,135 414,816
Pass 42,694 170,912 137,732 49,029 10,255 1,548 889 413,059
OAEM 2 1,258 0 0 0 197 246 1,703
Substandard 0 0 0 0 0 54 0 54
Residential first lien 195,705 354,035 150,421 108,962 89,214 317,986 1,977 1,218,300
Pass 195,694 354,013 150,391 108,596 89,073 313,932 1,900 1,213,599
OAEM 0 0 0 75 0 1,305 77 1,457
Substandard 11 22 30 291 141 2,749 0 3,244
Residential junior lien/home equity 25,133 2,458 4,511 3,680 1,442 6,836 566,423 610,483
Pass 25,133 2,458 4,430 3,680 1,442 6,676 563,088 606,907
OAEM 0 0 0 0 0 64 10 74
Substandard 0 0 81 0 0 96 3,325 3,502
Multifamily 56,127 75,824 16,654 55,568 72,187 108,109 1,436 385,905
Pass 56,127 75,824 16,654 55,568 58,027 107,045 1,436 370,681
OAEM 0 0 0 0 14,160 543 0 14,703
Substandard 0 0 0 0 0 521 0 521
Nonowner occupied 62,682 106,872 201,303 165,753 208,921 679,702 3,959 1,429,192
Pass 62,682 106,872 201,303 155,781 181,049 552,582 3,683 1,263,952
OAEM 0 0 0 9,972 20,955 107,392 121 138,440
Substandard 0 0 0 0 6,917 19,728 155 26,800
Owner occupied 42,351 56,499 61,763 39,319 34,847 150,834 5,048 390,661
Pass 42,351 54,856 60,212 37,655 33,528 141,773 4,831 375,206
OAEM 0 1,430 658 877 1,295 5,233 33 9,526
Substandard 0 213 893 787 24 3,828 184 5,929
Automobile 261,079 302,782 159,487 69,074 28,644 8,084 0 829,150
Pass 261,079 302,782 159,399 69,058 28,616 8,002 0 828,936
Substandard 0 0 88 16 28 82 0 214
Consumer credit cards 0 0 0 0 0 0 10,834 10,834
Pass 0 0 0 0 0 0 10,834 10,834
Consumer other 2,414 6,060 11,100 7,362 1,171 6,131 42,779 77,017
Pass 2,414 6,060 11,100 7,362 1,171 6,086 42,767 76,960
Substandard 0 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


	March 31, 2022
	Term Loans												Revolving Loans
	2022		2021		2020		2019		2018		Prior				Total
	(dollars in thousands)
Time and demand	$	24,040	$	210,288	$	87,599	$	126,639	$	73,613	$	73,454	$	396,844	$	992,477
Pass	24,040		209,897		85,098		110,803		73,326		64,994		391,032		959,190
OAEM	—		391		2,048		2,338		178		7,186		3,255		15,396
Substandard	—		—		453		13,498		109		1,274		2,557		17,891
Commercial credit cards	—		—		—		—		—		—		13,675		13,675
Pass	—		—		—		—		—		—		13,675		13,675


Equipment finance	2,505		—		—		—		—		—		—		2,505
Pass	2,505		—		—		—		—		—		—		2,505


Time and demand other	6,058		20,678		29,228		5,673		3,318		47,566		2,512		115,033
Pass	6,058		20,678		29,228		5,673		3,318		47,397		2,312		114,664

Substandard	—		—		—		—		—		169		200		369
Construction other	5,311		91,272		84,577		100,754		23,806		1,250		441		307,411
Pass	5,311		91,272		84,103		100,754		23,806		1,250		441		306,937

Substandard	—		—		474		—		—		—		—		474
Construction residential	3,265		85,129		2,430		735		18		—		—		91,577
Pass	3,265		85,129		2,149		735		18		—		—		91,296
OAEM	—		—		281		—		—		—		—		281

Residential first lien	80,916		427,539		364,873		117,741		79,385		309,316		1,972		1,381,742
Pass	80,916		427,528		364,854		117,473		78,931		306,527		1,895		1,378,124
OAEM	—		—		—		—		63		315		77		455
Substandard	—		11		19		268		391		2,474		—		3,163
Residential junior lien/home equity	18,665		55,709		1,926		2,922		2,426		5,884		536,947		624,479
Pass	18,665		55,709		1,926		2,848		2,426		5,736		534,182		621,492
OAEM	—		—		—		—		—		58		10		68
Substandard	—		—		—		74		—		90		2,755		2,919
Multifamily	19,494		89,609		78,400		27,474		35,535		149,698		1,371		401,581
Pass	19,494		89,609		78,400		27,474		21,035		123,638		1,371		361,021
OAEM	—		—		—		—		—		25,588		—		25,588
Substandard	—		—		—		—		14,500		472		—		14,972
Nonowner occupied	46,087		194,623		121,039		200,683		185,938		764,263		3,885		1,516,518
Pass	46,087		194,623		121,039		200,683		156,700		712,831		2,640		1,434,603
OAEM	—		—		—		—		15,240		35,903		1,088		52,231
Substandard	—		—		—		—		13,998		15,529		157		29,684
Owner occupied	31,902		85,107		62,071		51,792		32,035		158,206		5,069		426,182
Pass	31,902		85,083		60,575		49,894		31,552		151,909		4,957		415,872
OAEM	—		—		498		845		483		2,912		33		4,771
Substandard	—		24		998		1,053		—		3,385		79		5,539
Automobile and recreational vehicles	173,055		422,172		228,508		106,348		39,116		14,802		—		984,001
Pass	173,055		422,168		228,508		106,278		39,067		14,762		—		983,838

Substandard	—		4		—		70		49		40		—		163
Consumer credit cards	—		—		—		—		—		—		10,675		10,675
Pass	—		—		—		—		—		—		10,675		10,675


Consumer other	1,667		20,590		3,947		6,792		4,065		5,394		41,801		84,256
Pass	1,667		20,590		3,947		6,783		4,065		5,352		41,756		84,160

Substandard	—		—		—		9		—		42		45		96
Total	$	412,965	$	1,702,716	$	1,064,598	$	747,553	$	479,255	$	1,529,833	$	1,015,192	$	6,952,112

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2020																					December 31, 2021
		Term Loans												Revolving Loans									Term Loans																								Revolving Loans
		2020		2019		2018		2017		2016		Prior				Total				2021					2020				2019				2018				2017				Prior								Total
		(dollars in thousands)																					(dollars in thousands)
Time and demand	Time and demand	$	598,053	$	193,601	$	142,224	$	72,277	$	74,228	$	83,313			$	377,686				$	1,541,382		Time and demand	$	281,244			$	126,403			$	143,030			$	91,118			$	45,442			$	111,127			$	361,160			$	1,159,524
Pass	Pass	597,405		189,834		140,473		63,137		68,007		65,418		353,038				1,477,312			Pass		280,854				125,728				128,080				83,204				31,472				102,399				355,569				1,107,306
OAEM	OAEM	93		3,373		972		8,820		6,182		8,043		20,750				48,233			OAEM		390				596				1,125				7,780				13,945				7,126				2,803				33,765
Substandard	Substandard	555		394		779		320		39		9,852		3,898				15,837			Substandard		—				79				13,825				134				25				1,602				2,788				18,453
Commercial credit cards	Commercial credit cards	0		0		0		0		0		0		14,604				14,604			Commercial credit cards		—				—				—				—				—				—				13,928				13,928
Pass	Pass	0		0		0		0		0		0		14,604				14,604			Pass		—				—				—				—				—				—				13,928				13,928

Real estate construction	Real estate construction	150,493		133,195		104,167		34,803		389		1,009		3,165				427,221			Real estate construction		202,016				129,298				123,153				38,267				441				841				440				494,456
Pass	Pass	150,493		133,195		104,167		34,803		389		709		2,907				426,663			Pass		201,992				128,824				123,153				38,267				441				796				440				493,913
OAEM	OAEM	0		0		0		0		0		246		258				504			OAEM		24				474				—				—				—				—				—				498
Substandard	Substandard	0		0		0		0		0		54		0				54			Substandard		—				—				—				—				—				45				—				45
Residential first lien	Residential first lien	316,052		184,550		142,823		110,365		91,495		297,057		1,981				1,144,323			Residential first lien		376,106				375,904				126,788				84,484				74,268				260,010				1,974				1,299,534
Pass	Pass	316,028		184,533		142,467		110,260		91,059		292,158		1,904				1,138,409			Pass		376,095				375,885				126,618				84,079				74,135				256,815				1,897				1,295,524
OAEM	OAEM	0		0		83		0		100		1,520		77				1,780			OAEM		—				—				—				67				—				761				77				905
Substandard	Substandard	24		17		273		105		336		3,379		0				4,134			Substandard		11				19				170				338				133				2,434				—				3,105
Residential junior lien/home equity	Residential junior lien/home equity	3,055		5,783		4,545		2,005		1,303		7,127		582,451				606,269			Residential junior lien/home equity		56,861				1,999				3,322				2,684				1,009				5,348				549,493				620,716
Pass	Pass	3,055		5,698		4,545		2,005		1,303		6,909		579,068				602,583			Pass		56,861				1,999				3,246				2,684				1,009				5,195				546,546				617,540
OAEM	OAEM	0		0		0		0		0		112		10				122			OAEM		—				—				—				—				—				61				10				71
Substandard	Substandard	0		85		0		0		0		106		3,373				3,564			Substandard		—				—				76				—				—				92				2,937				3,105
Multifamily	Multifamily	76,249		16,287		69,439		66,963		34,383		106,328		1,590				371,239			Multifamily		90,062				73,068				16,782				36,523				63,872				103,774				1,351				385,432
Pass	Pass	76,249		16,287		69,439		66,963		34,383		104,972		1,590				369,883			Pass		90,062				73,068				16,782				21,846				49,832				102,761				1,351				355,702
OAEM	OAEM	0		0		0		0		0		131		0				131			OAEM		—				—				—				—				14,040				525				—				14,565
Substandard	Substandard	0		0		0		0		0		1,225		0				1,225			Substandard		—				—				—				14,677				—				488				—				15,165
Nonowner occupied	Nonowner occupied	105,861		199,280		161,018		214,915		217,883		518,052		4,142				1,421,151			Nonowner occupied		194,137				98,840				202,236				173,053				177,295				615,943				3,743				1,465,247
Pass	Pass	105,861		190,301		139,643		181,659		175,148		419,900		3,740				1,216,252			Pass		194,137				98,840				202,236				155,293				152,174				563,743				2,499				1,368,922
OAEM	OAEM	0		8,979		21,375		26,339		37,762		66,752		129				161,336			OAEM		—				—				—				3,723				19,235				39,737				1,088				63,783
Substandard	Substandard	0		0		0		6,917		4,973		31,400		273				43,563			Substandard		—				—				—				14,037				5,886				12,463				156				32,542
Owner occupied	Owner occupied	59,519		72,313		61,079		40,796		27,415		152,555		5,502				419,179			Owner occupied		77,710				62,380				53,954				34,115				32,989				134,713				4,557				400,418
Pass	Pass	58,551		70,726		55,478		39,351		26,359		141,376		5,282				397,123			Pass		77,710				59,973				51,513				33,623				31,644				129,593				4,443				388,499
OAEM	OAEM	968		684		4,736		1,421		114		6,572		33				14,528			OAEM		—				2,194				1,220				492				1,321				1,716				33				6,976
Substandard	Substandard	0		903		865		24		942		4,607		187				7,528			Substandard		—				213				1,221				—				24				3,404				81				4,943
Automobile		350,293		202,923		96,355		45,218		14,285		3,726		0				712,800
Automobile and recreational vehicles																					Automobile and recreational vehicles		456,730				252,518				122,943				48,375				17,230				3,484				—				901,280
Pass	Pass	350,293		202,827		96,336		45,187		14,255		3,641		0				712,539			Pass		456,730				252,518				122,867				48,361				17,224				3,432				—				901,132

Substandard	Substandard	0		96		19		31		30		85		0				261			Substandard		—				—				76				14				6				52				—				148
Consumer credit cards	Consumer credit cards	0		0		0		0		0		0		12,360				12,360			Consumer credit cards		—				—				—				—				—				—				11,151				11,151
Pass	Pass	0		0		0		0		0		0		12,360				12,360			Pass		—				—				—				—				—				—				11,151				11,151

Consumer other	Consumer other	7,814		14,464		10,752		1,965		711		6,383		48,566				90,655			Consumer other		22,156				4,655				8,030				5,084				542				5,503				41,574				87,544
Pass	Pass	7,814		14,464		10,752		1,965		711		6,373		48,563				90,642			Pass		22,156				4,655				8,030				5,084				542				5,460				41,560				87,487

Substandard	Substandard	0		0		0		0		0		10		3				13			Substandard		—				—				—				—				—				43				14				57
Total	Total	$	1,667,389	$	1,022,396	$	792,402	$	589,307	$	462,092	$	1,175,550	$	1,052,047			$	6,761,183		Total		$	1,757,022			$	1,125,065			$	800,238			$	513,703			$	413,088			$	1,240,743			$	989,371			$	6,839,230

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Portfolio Risks

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

Total net charge-offs for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$7.2~~$1.1 million and ~~$8.0~~$3.3 million, respectively.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. 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.

June 30, 2021
30 - 59 days past due 60 - 89 days past due 90 days or greater and still accruing Nonaccrual Total past due and nonaccrual Current Total
(dollars in thousands)
Commercial, financial, agricultural and other $ 166 $ 48 $ 8 $ 12,349 $ 12,571 $ 1,361,606 $ 1,374,177
Time and demand 116 6 0 12,349 12,471 1,347,594 1,360,065
Commercial credit cards 50 1 42 8 0 100 14,012 14,112
Real estate construction 0 0 0 54 54 414,762 414,816
Residential real estate 3,064 578 434 6,102 10,178 1,818,605 1,828,783
Residential first lien 2,116 381 367 2,817 5,681 1,212,619 1,218,300
Residential junior lien/home equity 948 197 67 3,285 4,497 605,986 610,483
Commercial real estate 91 149 0 27,424 27,664 2,178,094 2,205,758
Multifamily 0 0 0 445 445 385,460 385,905
Nonowner occupied 0 101 0 24,726 24,827 1,404,365 1,429,192
Owner occupied 91 48 0 2,253 2,392 388,269 390,661
Loans to individuals 1,350 449 461 271 2,531 914,470 917,001
Automobile 945 1 322 66 214 1,547 827,603 829,150
Consumer credit cards 38 23 120 0 181 10,653 10,834
Consumer other 367 104 275 57 803 76,214 77,017
Total loans $ 4,671 $ 1,224 $ 903 $ 46,200 $ 52,998 $ 6,687,537 $ 6,740,535
In the March 31, 2022 table below, $14.5 million in multifamily commercial real estate loans are reflected as 30-59 days past due. This balance relates to one commercial borrower and subsequent to March 31, 2022, the loan was paid off in full.


	March 31, 2022
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	160	$	86	$	998	$	2,037	$	3,281	$	1,120,409	$	1,123,690
Time and demand	110		30		989		2,037		3,166		989,311		992,477
Commercial credit cards	48		56		9		—		113		13,562		13,675
Equipment finance	—		—		—		—		—		2,505		2,505
Time and demand other	2		—		—		—		2		115,031		115,033
Real estate construction	418		474		—		—		892		398,096		398,988
Construction other	—		474		—		—		474		306,937		307,411
Construction residential	418		—		—		—		418		91,159		91,577
Residential real estate	3,764		568		306		5,500		10,138		1,996,083		2,006,221
Residential first lien	2,268		156		104		2,777		5,305		1,376,437		1,381,742
Residential junior lien/home equity	1,496		412		202		2,723		4,833		619,646		624,479
Commercial real estate	15,140		108		—		22,784		38,032		2,306,249		2,344,281
Multifamily	14,500		—		—		409		14,909		386,672		401,581
Nonowner occupied	511		71		—		21,160		21,742		1,494,776		1,516,518
Owner occupied	129		37		—		1,215		1,381		424,801		426,182
Loans to individuals	1,334		640		617		259		2,850		1,076,082		1,078,932
Automobile and recreational vehicles	803		299		122		163		1,387		982,614		984,001
Consumer credit cards	70		57		68		—		195		10,480		10,675
Consumer other	461		284		427		96		1,268		82,988		84,256
Total loans and leases	$	20,816	$	1,876	$	1,921	$	30,580	$	55,193	$	6,896,919	$	6,952,112

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2020																December 31, 2021
		30 - 59 days past due			60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total			30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
		(dollars in thousands)																(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	146		$	62	$	112	$	3,317	$	3,637	$	1,552,349	$	1,555,986	Commercial, financial, agricultural and other	$	633	$	987	$	155	$	2,006	$	3,781	$	1,169,671	$	1,173,452
Time and demand	Time and demand	97			28		23		3,317		3,465		1,537,917		1,541,382		Time and demand	605		972		144		2,006		3,727		1,155,797		1,159,524
Commercial credit cards	Commercial credit cards	49		1	34		89		0		172		14,432		14,604		Commercial credit cards	28		15		11		—		54		13,874		13,928
Real estate construction	Real estate construction	936			0		0		54		990		426,231		427,221		Real estate construction	813		—		448		45		1,306		493,150		494,456
Residential real estate	Residential real estate	3,883			1,492		769		6,824		12,968		1,737,624		1,750,592		Residential real estate	3,393		983		218		5,608		10,202		1,910,048		1,920,250
Residential first lien	Residential first lien	1,775			660		267		3,489		6,191		1,138,132		1,144,323		Residential first lien	1,934		354		51		2,706		5,045		1,294,489		1,299,534
Residential junior lien/home equity	Residential junior lien/home equity	2,108			832		502		3,335		6,777		599,492		606,269		Residential junior lien/home equity	1,459		629		167		2,902		5,157		615,559		620,716
Commercial real estate	Commercial real estate	237			160		3		35,072		35,472		2,176,097		2,211,569		Commercial real estate	—		74		—		40,195		40,269		2,210,828		2,251,097
Multifamily	Multifamily	0			0		0		460		460		370,779		371,239		Multifamily	—		—		—		15,097		15,097		370,335		385,432
Nonowner occupied	Nonowner occupied	18			104		0		31,822		31,944		1,389,207		1,421,151		Nonowner occupied	—		—		—		23,930		23,930		1,441,317		1,465,247
Owner occupied	Owner occupied	219			56		3		2,790		3,068		416,111		419,179		Owner occupied	—		74		—		1,168		1,242		399,176		400,418
Loans to individuals	Loans to individuals	2,870			852		639		274		4,635		811,180		815,815		Loans to individuals	1,611		417		785		206		3,019		996,956		999,975
Automobile		2,090		1	417		94		261		2,862		709,938		712,800
Automobile and recreational vehicles																	Automobile and recreational vehicles	1,228		175		199		148		1,750		899,530		901,280
Consumer credit cards	Consumer credit cards	52			39		123		0		214		12,146		12,360		Consumer credit cards	36		44		63		—		143		11,008		11,151
Consumer other	Consumer other	728			396		422		13		1,559		89,096		90,655		Consumer other	347		198		523		58		1,126		86,418		87,544
Total loans		$	8,072		$	2,566	$	1,523	$	45,541	$	57,702	$	6,703,481	$	6,761,183
Total loans and leases																	Total loans and leases	$	6,450	$	2,461	$	1,606	$	48,060	$	58,577	$	6,780,653	$	6,839,230

Nonaccrual Loans

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

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

Nonperforming Loans

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

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

At ~~June 30,~~March 31, 2022 and December 31, 2021, there were 0no nonperforming loans held for sale. ~~At December 31, 2020, there was one nonperforming loan totaling $13 thousand classified as held for sale.~~ During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~a $5.0 million nonperforming~~

~~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 0no 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, 2021 December 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 demand 5,598 14,230 2,025 2,725
Real estate construction 54 53 54 53
Residential real estate 10,029 12,207 10,939 13,258
Residential first lien 5,364 6,746 6,062 7,575
Residential junior lien/home equity 4,665 5,461 4,877 5,683
Commercial real estate 13,575 14,388 20,650 23,641
Multifamily 0 0 1 82
Nonowner occupied 11,134 11,621 16,786 19,459
Owner occupied 2,441 2,767 3,863 4,100
Loans to individuals 476 513 418 447
Automobile 419 452 405 430
Consumer other 57 61 13 17
Subtotal 29,732 41,391 34,086 40,124
With an allowance recorded:
Commercial, financial, agricultural and other 8,737 8,889 2,358 4,210 9,377 1,268
Time and demand 8,737 8,889 2,358 4,210 9,377 1,268
Real estate construction 0 0 0 0 0 0
Residential real estate 0 0 0 0 0 0
Residential first lien 0 0 0 0 0 0
Residential junior lien/home equity 0 0 0 0 0 0
Commercial real estate 14,324 15,850 588 15,757 15,830 3,638
Multifamily 445 463 113 459 470 116
Nonowner occupied 13,614 15,122 475 15,060 15,122 3,508
Owner occupied 265 265 0 238 238 14
Loans to individuals 0 0 0 0 0 0
Automobile 0 0 0 0 0 0
Consumer other 0 0 0 0 0 0
Subtotal 23,061 24,739 2,946 19,967 25,207 4,906
Total $ 52,793 $ 66,130 $ 2,946 $ 54,053 $ 65,331 $ 4,906

~~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,
2021 2020
Total Loans Originated Loans Acquired 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 demand 3,966 43
Real estate construction 54 0 0 0 0 0
Residential real estate 10,726 221 10,182 159 1,922 17
Residential first lien 5,822 176
Residential junior lien/home equity 4,904 45
Commercial real estate 15,879 30 14,367 67 238 0
Multifamily 0 0
Nonowner occupied 13,079 10
Owner occupied 2,800 20
Loans to individuals 477 6 457 6 11 0
Automobile 426 6
Consumer other 51 0
Subtotal 31,102 300 31,900 266 2,245 17
With an allowance recorded:
Commercial, financial, agricultural and other 6,813 36 1,881 1 0 0
Time and demand 6,813 36
Real estate construction 0 0 0 0 51 0
Residential real estate 0 0 290 0 0 0
Residential first lien 0 0
Residential junior lien/home equity 0 0
Commercial real estate 14,730 0 11,509 4 1,222 0
Multifamily 457 0
Nonowner occupied 14,096 0
Owner occupied 177 0
Loans to individuals 0 0 0 0 0 0
Automobile 0 0
Consumer other 0 0
Subtotal 21,543 36 13,680 5 1,273 0
Total $ 52,645 $ 336 $ 45,580 $ 271 $ 3,518 $ 17

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

For the Three Months Ended June 30,
2021 2020
Total Loans Originated Loans Acquired 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 demand 5,591 31
Real estate construction 54 0 0 0 0 0
Residential real estate 10,560 1 159 9,836 80 1,753 15
Residential first lien 5,661 132
Residential junior lien/home equity 4,899 27
Commercial real estate 13,689 7 17,411 48 246 0
Multifamily 0 0
Nonowner occupied 11,227 2
Owner occupied 2,462 5
Loans to individuals 475 4 468 4 11 0
Automobile 415 4
Consumer other 60 0
Subtotal 30,369 201 34,473 144 2,084 15
With an allowance recorded:
Commercial, financial, agricultural and other 8,791 1 19 2,028 0 0 0
Time and demand 8,791 19
Real estate construction 0 0 0 0 103 0
Residential real estate 0 1 0 254 0 0 0
Residential first lien 0 0
Residential junior lien/home equity 0 0
Commercial real estate 14,329 0 17,142 0 1,828 0
Multifamily 450 0
Nonowner occupied 13,614 0
Owner occupied 265 0
Loans to individuals 0 0 0 0 0 0
Automobile 0 0
Consumer other 0 0
Subtotal 23,120 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 result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternative financing sources. Troubled debt restructured loans are considered to be nonperforming loans.

~~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. As of June 30, 2021, loans with an aggregate principal balance of $59.5 million were in a forbearance period granted under the CARES Act.

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

June 30, 2021 December 31, 2020
(dollars in thousands)
Troubled debt restructured loans
Accrual status $ 6,593 $ 8,512
Nonaccrual status 23,981 14,740
Total $ 30,574 $ 23,252
Commitments
Letters of credit $ 60 $ 60
Unused lines of credit 12 11
Total $ 72 $ 71

2925

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of March 31, 2022 and December 31, 2021. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.


	March 31, 2022						December 31, 2021
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,505	$	9,719			$	3,720	$	10,303
Time and demand	3,505		9,719				3,720		10,303

Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—				45		53
Construction other	—		—
Construction residential	—		—
Residential real estate	9,161		11,035				9,365		11,294
Residential first lien	5,245		6,327				5,200		6,337
Residential junior lien/home equity	3,916		4,708				4,165		4,957
Commercial real estate	23,425		24,395				40,591		41,525
Multifamily	—		—				14,677		14,677
Nonowner occupied	21,791		22,558				24,581		25,310
Owner occupied	1,634		1,837				1,333		1,538
Loans to individuals	423		542				446		485
Automobile and recreational vehicles	327		441				388		422

Consumer other	96		101				58		63
Subtotal	36,514		45,691				54,167		63,660
With an allowance recorded:
Commercial, financial, agricultural and other	544		572		$	272	327		349		$	307
Time and demand	544		572		272		327		349		307

Equipment finance	—		—		—
Time and demand other	—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—
Construction residential	—		—		—
Residential real estate	—		—		—		—		—		—
Residential first lien	—		—		—		—		—		—
Residential junior lien/home equity	—		—		—		—		—		—
Commercial real estate	409		441		79		686		711		88
Multifamily	409		441		79		421		446		88
Nonowner occupied	—		—		—		—		—		—
Owner occupied	—		—		—		265		265		—
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—

Consumer other	—		—		—		—		—		—
Subtotal	953		1,013		351		1,013		1,060		395
Total	$	37,467	$	46,704	$	351	$	55,180	$	64,720	$	395

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended March 31,
	2022				2021

	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,561	$	29	$	2,280	$	11
Time and demand	3,561		29		2,280		11

Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		54		—
Construction other	—		—
Construction residential	—		—
Residential real estate	9,201		84		10,892		63
Residential first lien	5,197		62		5,982		45
Residential junior lien/home equity	4,004		22		4,910		18
Commercial real estate	24,312		13		25,739		22
Multifamily	—		—		—		—
Nonowner occupied	22,714		9		22,593		7
Owner occupied	1,598		4		3,146		15
Loans to individuals	435		4		479		2
Automobile and recreational vehicles	350		4		437		2

Consumer other	85		—		42		—
Subtotal	37,509		130		39,444		98
With an allowance recorded:
Commercial, financial, agricultural and other	384		6		4,895		18
Time and demand	384		6		4,895		18

Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		—		—
Construction other	—		—
Construction residential	—		—
Residential real estate	—		—		—		—
Residential first lien	—		—		—		—
Residential junior lien/home equity	—		—		—		—
Commercial real estate	416		—		7,462		—
Multifamily	416		—		464		—
Nonowner occupied	—		—		6,917		—
Owner occupied	—		—		81		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—

Consumer other	—		—		—		—
Subtotal	800		6		12,357		18
Total	$	38,309	$	136	$	51,801	$	116

Unfunded commitments related to nonperforming loans were $0.2 million at both March 31, 2022 and December 31, 2021. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required at March 31, 2022 and December 31, 2021.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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


	March 31, 2022		December 31, 2021
	(dollars in thousands)
Troubled debt restructured loans
Accrual status	$	6,887	$	7,120
Nonaccrual status	10,090		13,134
Total	$	16,977	$	20,254
Commitments
Letters of credit	$	60	$	60
Unused lines of credit	18		16
Total	$	78	$	76

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

For the Six 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 other 3 $ 6,373 $ 0 $ 6,596 $ 12,969 $ 10,167 $ 1,091
Time and demand 3 6,373 0 6,596 12,969 10,167 1,091
Residential real estate 7 0 105 186 291 287 0
Residential first lien 6 0 105 172 277 274 0
Residential junior lien/home equity 1 0 0 14 14 13 0
Loans to individuals 4 0 93 0 93 85 0
Automobile 4 0 93 0 93 85 0
Total 14 $ 6,373 $ 198 $ 6,782 $ 13,353 $ 10,539 $ 1,091


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




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









Total	2	$	—	$	10	$	59	$	69	$	69	$	—


		For the Six Months Ended June 30, 2020														For the Three Months Ended March 31, 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 other															Commercial, financial, agricultural and other	2	$	6,373	$	—	$	—	$	6,373	$	6,339	$	1,190
Time and demand															Time and demand	2	6,373		—		—		6,373		6,339		1,190

Residential real estate	Residential real estate	4	0		0		264		264		256		0		Residential real estate	3	—		105		14		119		119		—
Commercial real estate		2	0		0		12		12		9		0
Residential first lien															Residential first lien	2	—		105		—		105		106		—
Residential junior lien/home equity															Residential junior lien/home equity	1	—		—		14		14		13		—

Loans to individuals	Loans to individuals	10	0		71		124		195		186		0		Loans to individuals	2	—		64		—		64		61		—
Automobile and recreational vehicles															Automobile and recreational vehicles	2	—		64		—		64		61		—

Total	Total	16	$	0	$	71	$	400	$	471	$	451	$	0	Total	7	$	6,373	$	169	$	14	$	6,556	$	6,519	$	1,190

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, $198~~$10 thousand and ~~$71~~$169 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 ~~2021~~2022 and ~~2020, the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.~~

~~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 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 other 1 $ 0 $ 0 $ 6,596 $ 6,596 $ 3,916 $ 0
Time and demand 1 0 0 6,596 6,596 3,916 0
Residential real estate 4 0 0 172 172 169 0
Residential first lien 4 0 0 172 172 169 0
Loans to individuals 2 0 29 0 29 29 0
Automobile 2 0 29 0 29 29 0
Total 7 $ 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 estate 2 $ 0 $ 0 $ 146 $ 146 $ 142 $ 0
Loans to individuals 3 0 53 1 54 55 0
Total 5 $ 0 $ 53 $ 147 $ 200 $ 197 $ 0

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the six months ended June 30, 2021, and 2020, $29 thousand and $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 2021 and 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 ~~six months ended June 30:~~
2021 2020
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
(dollars in thousands)
Residential real estate 0 $ 0 1 $ 50
Total 0 $ 0 1 $ 50

~~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 ~~June 30:~~March 31:



	2022			2021
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(dollars in thousands)




Residential real estate	1	$	17	—	$	—
Residential first lien	1	17		—	—









Total	1	$	17	—	$	—

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


	For the Three Months Ended March 31, 2022
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	18,093	$	(475)	$	80	$	3,023	$	20,721
Time and demand	15,283		(144)		53		3,715		18,907
Commercial credit cards	247		(19)		1		113		342
Equipment finance	—		—		—		31		31
Time and demand other	2,563		(312)		26		(836)		1,441
Real estate construction	4,220		—		—		710		4,930
Construction other	3,278		—		—		(103)		3,175
Construction residential	942		—		—		813		1,755
Residential real estate	12,625		(139)		29		4,213		16,728
Residential first lien	7,459		(40)		23		3,683		11,125
Residential junior lien/home equity	5,166		(99)		6		530		5,603
Commercial real estate	33,376		—		14		314		33,704
Multifamily	3,561		—		—		49		3,610
Nonowner occupied	24,838		—		5		(1,576)		23,267
Owner occupied	4,977		—		9		1,841		6,827
Loans to individuals	24,208		(1,009)		366		(8,460)		15,105
Automobile and recreational vehicles	21,392		(552)		255		(8,460)		12,635
Consumer credit cards	496		(109)		24		(29)		382
Consumer other	2,320		(348)		87		29		2,088
Total loans and leases	$	92,522	$	(1,623)	$	489	$	(200)	$	91,188

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

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	For the Three Months Ended March 31, 2022
							Loans
	Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses		Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses
	(dollars in thousands)
Commercial, financial, agricultural and other	$	20,721	$	272	$	20,449	$	1,123,690	$	3,179	$	1,120,511
Time and demand	18,907		272		18,635		992,477		3,179		989,298
Commercial credit cards	342		—		342		13,675		—		13,675
Equipment finance	31		—		31		2,505		—		2,505
Time and demand other	1,441		—		1,441		115,033		—		115,033
Real estate construction	4,930		—		4,930		398,988		—		398,988
Construction other	3,175		—		3,175		307,411		—		307,411
Construction residential	1,755		—		1,755		91,577		—		91,577
Residential real estate	16,728		—		16,728		2,006,221		253		2,005,968
Residential first lien	11,125		—		11,125		1,381,742		—		1,381,742
Residential junior lien/home equity	5,603		—		5,603		624,479		253		624,226
Commercial real estate	33,704		79		33,625		2,344,281		37,263		2,307,018
Multifamily	3,610		79		3,531		401,581		14,909		386,672
Nonowner occupied	23,267		—		23,267		1,516,518		21,425		1,495,093
Owner occupied	6,827		—		6,827		426,182		929		425,253
Loans to individuals	15,105		—		15,105		1,078,932		—		1,078,932
Automobile and recreational vehicles	12,635		—		12,635		984,001		—		984,001
Consumer credit cards	382		—		382		10,675		—		10,675
Consumer other	2,088		—		2,088		84,256		—		84,256
Total loans and leases	$	91,188	$	351	$	90,837	$	6,952,112	$	40,695	$	6,911,417

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2021 2020
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
(dollars in thousands)
Residential real estate 0 $ 0 1 $ 50
Total 0 $ 0 1 $ 50

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


		For the Six Months Ended June 30, 2021												For the Three Months Ended March 31, 2021
		Beginning balance			Charge-offs		Recoveries		Provision (credit)a		Ending balance			Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
		(dollars in thousands)												(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	17,187		$	(4,456)	$	193	$	8,542	$	21,466	Commercial, financial, agricultural and other	$	17,187	$	(569)	$	90	$	5,093	$	21,801
Time and demand	Time and demand	16,838			(4,338)		188		8,410		21,098		Time and demand	16,838		(460)		89		4,960		21,427
Commercial credit cards	Commercial credit cards	349			(118)		5		132		368		Commercial credit cards	349		(109)		1		133		374
Real estate construction	Real estate construction	7,966			0		135		(3,816)		4,285		Real estate construction	7,966		—		—		(3,945)		4,021
Residential real estate	Residential real estate	14,358		—	(119)		211		(1,517)		12,933		Residential real estate	14,358		(105)		37		(1,461)		12,829
Residential first lien	Residential first lien	7,919			(36)		182		(671)		7,394		Residential first lien	7,919		(23)		23		(692)		7,227
Residential junior lien/home equity	Residential junior lien/home equity	6,439			(83)		29		(846)		5,539		Residential junior lien/home equity	6,439		(82)		14		(769)		5,602
Commercial real estate	Commercial real estate	41,953			(1,557)		40		(4,641)		35,795		Commercial real estate	41,953		(1,550)		39		(2,774)		37,668
Multifamily	Multifamily	6,240			(1)		0		(1,860)		4,379		Multifamily	6,240		(1)		—		(1,988)		4,251
Nonowner occupied	Nonowner occupied	28,414			(1,556)		40		13		26,911		Nonowner occupied	28,414		(1,549)		39		985		27,889
Owner occupied	Owner occupied	7,299		—	0		0		(2,794)		4,505		Owner occupied	7,299		—		—		(1,771)		5,528
Loans to individuals	Loans to individuals	19,845			(2,472)		828		4,358		22,559		Loans to individuals	19,845		(1,541)		329		1,811		20,444
Automobile		16,133			(1,068)		575		3,658		19,298
Automobile and recreational vehicles													Automobile and recreational vehicles	16,133		(680)		181		1,254		16,888
Consumer credit cards	Consumer credit cards	635			(247)		42		98		528		Consumer credit cards	635		(168)		17		205		689
Consumer other	Consumer other	3,077			(1,157)		211		602		2,733		Consumer other	3,077		(693)		131		352		2,867
Total loans		$	101,309		$	(8,604)	$	1,407	$	2,926	$	97,038
Total loans and leases													Total loans and leases	$	101,309	$	(3,765)	$	495	$	(1,276)	$	96,763

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

For the Six Months Ended June 30, 2021
Loans
Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses Ending balance Ending balance: individually evaluated for credit losses Ending balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other $ 21,466 $ 2,358 $ 19,108 $ 1,374,177 $ 13,688 $ 1,360,489
Time and demand 21,098 2,358 18,740 1,360,065 13,688 1,346,377
Commercial credit cards 368 0 368 14,112 0 14,112
Real estate construction 4,285 0 4,285 414,816 0 414,816
Residential real estate 12,933 0 12,933 1,828,783 541 1,828,242
Residential first lien 7,394 0 7,394 1,218,300 0 1,218,300
Residential junior lien/home equity 5,539 0 5,539 610,483 541 609,942
Commercial real estate 35,795 588 35,207 2,205,758 27,099 2,178,659
Multifamily 4,379 113 4,266 385,905 445 385,460
Nonowner occupied 26,911 475 26,436 1,429,192 24,624 1,404,568
Owner occupied 4,505 0 4,505 390,661 2,030 388,631
Loans to individuals 22,559 0 22,559 917,001 0 917,001
Automobile 19,298 0 19,298 829,150 0 829,150
Consumer credit cards 528 0 528 10,834 0 10,834
Consumer other 2,733 0 2,733 77,017 0 77,017
Total loans $ 97,038 $ 2,946 $ 94,092 $ 6,740,535 $ 41,328 $ 6,699,207

~~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, 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 (1,771) 0 (559) (2,415) (3,809) (8,554)
Recoveries 117 26 121 44 476 784
Provision (credit) 6,245 483 5,586 15,770 7,683 35,767
Ending balance 24,812 3,067 9,239 33,130 9,334 79,582
Acquired loans:
Beginning balance 13 0 2 37 0 52
Charge-offs 0 0 (91) (2) (207) (300)
Recoveries 15 0 25 0 8 48
Provision (credit) 304 171 64 1,321 199 2,059
Ending balance 332 171 0 1,356 0 1,859
Total ending balance $ 25,144 $ 3,238 $ 9,239 $ 34,486 $ 9,334 $ 81,441
Ending balance: individually evaluated for impairment $ 958 $ 171 $ 0 $ 5,766 $ 0 $ 6,895
Ending balance: collectively evaluated for impairment 24,186 3,067 9,239 28,720 9,334 74,546
Loans:
Ending balance 1,773,099 416,329 1,723,288 2,224,710 784,649 6,922,075
Ending balance: individually evaluated for impairment 3,336 308 1,498 32,537 0 37,679
Ending balance: collectively evaluated for impairment 1,769,763 416,021 1,721,790 2,192,173 784,649 6,884,396

~~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 balance Charge-offs Recoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other $ 21,801 $ (3,887) $ 103 $ 3,449 $ 21,466
Time and demand 21,427 (3,878) 99 3,450 21,098
Commercial credit cards 374 (9) 4 (1) 368
Real estate construction 4,021 0 135 129 4,285
Residential real estate 12,829 — (14) 174 (56) 12,933
Residential first lien 7,227 (13) 159 21 7,394
Residential junior lien/home equity 5,602 (1) 15 (77) 5,539
Commercial real estate 37,668 (7) 1 (1,867) 35,795
Multifamily 4,251 0 0 128 4,379
Nonowner occupied 27,889 (7) 1 (972) 26,911
Owner occupied 5,528 — 0 0 (1,023) 4,505
Loans to individuals 20,444 (931) 499 2,547 22,559
Automobile 16,888 (388) 394 2,404 19,298
Consumer credit cards 689 (79) 25 (107) 528
Consumer other 2,867 (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)
Recoveries 49 26 59 0 264 398
Provision (credit) (1,330) 189 1,463 4,015 2,128 6,465
Ending balance 24,812 3,067 9,239 33,130 9,334 79,582
Acquired loans:
Beginning balance 350 0 0 1,238 0 1,588
Charge-offs 0 0 (66) (1) (71) (138)
Recoveries 2 0 12 0 1 15
Provision (credit) (20) 171 54 119 70 394
Ending balance 332 171 0 1,356 0 1,859
Total ending balance $ 25,144 $ 3,238 $ 9,239 $ 34,486 $ 9,334 $ 81,441


	For the Three Months Ended March 31, 2021
							Loans
	Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses		Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses
	(dollars in thousands)
Commercial, financial, agricultural and other	$	21,801	$	2,506	$	19,295	$	1,555,671	$	9,991	$	1,545,680
Time and demand	21,427		2,506		18,921		1,541,280		9,991		1,531,289
Commercial credit cards	374		—		374		14,391		—		14,391
Real estate construction	4,021		—		4,021		404,580		—		404,580
Residential real estate	12,829		—		12,829		1,756,615		1,055		1,755,560
Residential first lien	7,227		—		7,227		1,152,314		512		1,151,802
Residential junior lien/home equity	5,602		—		5,602		604,301		543		603,758
Commercial real estate	37,668		601		37,067		2,167,506		27,413		2,140,093
Multifamily	4,251		115		4,136		363,604		459		363,145
Nonowner occupied	27,889		459		27,430		1,393,968		24,883		1,369,085
Owner occupied	5,528		27		5,501		409,934		2,071		407,863
Loans to individuals	20,444		—		20,444		852,522		—		852,522
Automobile and recreational vehicles	16,888		—		16,888		759,061		—		759,061
Consumer credit cards	689		—		689		10,901		—		10,901
Consumer other	2,867		—		2,867		82,560		—		82,560
Total loans and leases	$	96,763	$	3,107	$	93,656	$	6,736,894	$	38,459	$	6,698,435

Note 8 Leases

First Commonwealth has elected to apply certain practical expedients provided under ASU 2016-02 "Leases" (Topic 842) including (i) to not apply the requirements in the new standard to short-term leases (ii) to not reassess the lease classification for

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

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


						June 30, 2021			December 31, 2020					March 31, 2022			December 31, 2021
Balance sheet:	Balance sheet:											Balance sheet:
Operating lease asset classified as premises and equipment	Operating lease asset classified as premises and equipment					$	39,636		$	42,617		Operating lease asset classified as premises and equipment		$	40,920		$	40,550
Operating lease liability classified as other liabilities	Operating lease liability classified as other liabilities					43,854			46,819			Operating lease liability classified as other liabilities		45,222			44,801
		For the Three Months Ended				For the Six Months Ended							For the Three Months Ended
		June 30, 2021		June 30, 2020		June 30, 2021			June 30, 2020					March 31, 2022			March 31, 2021
Income statement:	Income statement:											Income statement:
Operating lease cost classified as occupancy and equipment expense	Operating lease cost classified as occupancy and equipment expense	$	1,200	$	1,368	$	2,401		$	2,736		Operating lease cost classified as occupancy and equipment expense		$	1,216		$	1,208

Weighted average lease term, in years	Weighted average lease term, in years					14.69			14.96			Weighted average lease term, in years		13.72			14.72
Weighted average discount rate	Weighted average discount rate					3.41		%	3.41		%	Weighted average discount rate		3.19		%	3.41		%
Operating cash flows	Operating cash flows					$	1,193		$	1,325		Operating cash flows		$	1,164		$	1,201

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

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

Future minimum payments for operating leases with initial or remaining terms of one year or more as of ~~June 30, 2021~~March 31, 2022 were as follows (dollars in thousands):


For the twelve months ended:
~~June 30, 2022~~March 31, 2023	$	~~4,595~~4,854
~~June 30, 2023~~March 31, 2024	~~4,406~~4,822
~~June 30, 2024~~March 31, 2025	~~4,240~~4,714
~~June 30, 2025~~March 31, 2026	~~4,144~~4,390
~~June 30, 2026~~March 31, 2027	~~3,702~~4,039
Thereafter	~~35,772~~34,356
Total future minimum lease payments	~~56,859~~57,175
Less remaining imputed interest	~~13,005~~11,953
Operating lease liability	$	~~43,854~~45,222

Note 9 Income Taxes

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, First Commonwealth had 0no material unrecognized tax benefits or accrued interest and penalties. If applicable, First Commonwealth will record interest and penalties as a component of noninterest expense.

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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~~2018 are no longer open to examination by federal and state taxing authorities.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Note 10 Fair Values of Assets and Liabilities

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

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

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

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

Other investments recorded in the unaudited Consolidated Statements of Financial Condition are primarily comprised of FHLB stock whose estimated fair value is based on its par value. Additional information on FHLB stock is provided in Note 6, “Investment Securities.”

Loans held for sale include residential mortgage loans originated for sale in the secondary mortgage market. The estimated fair value for these loans was determined on the basis of rates obtained in the respective secondary market. Loans held for sale 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. Also included in loans held for sale are commercial loans for which fair value is determined using an executed trade or market bid obtained from potential buyers.

Interest rate derivatives are reported at an estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities, and consist of interest rate swaps where there is no significant deterioration in the counterparties' and/or loan customers' credit risk since origination of the interest rate swap as well as interest rate caps, interest rate collars and risk

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

~~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 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.

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 nonperforming loans.

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

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

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

3835

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 Inputs

Range /
(weighted average)

Fair Value (dollars
in thousands)

Valuation
Technique

Unobservable Inputs

Range /
(weighted average)

June 30, 2021

March 31, 2022

Other Investments

1,670

CarryingValue

N/A

Other Investments

1,170

Carrying Value

N/A

Nonperforming Loans

712

(a)

Gas Reserve Study

Discount rate

10.00%

Nonperforming Loans

538

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$2.00 - $2.00 (b)

Gas per MMBTU

$3.00 - $3.00 (b)

Oil per BBL/d

$50.00 - $50.00 (b)

Oil per BBL/d

$80.00 - $80.00 (b)

5,160

(a)

Discounted Cash Flow

Discount Rate

6.50%

Limited Partnership Investments

7,448

Par Value

N/A

Limited Partnership Investments

15,999

Par Value

N/A

December 31, 2020

December 31, 2021

Other Investments

1,670

CarryingValue

N/A

Other Investments

1,170

Carrying Value

N/A

Nonperforming Loans

798

(a)

Gas Reserve Study

Discount rate

10.00%

Nonperforming Loans

598

(a)

Gas Reserve Study

Discount rate

10.00%

Gas per MMBTU

$1.46 - $1.48 (b)

Gas per MMBTU

$2.00 - $2.00 (b)

Oil per BBL/d

$36 - $36 (b)

Oil per BBL/d

$50.00 - $50.00 (b)

Limited Partnership Investments

6,619

Par Value

N/A

Limited Partnership Investments

14,981

Par Value

N/A

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

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

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

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


		June 30, 2021									March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:									Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	$	0	$	6,327	$	0	$	6,327	Mortgage-Backed Securities - Residential	$	—	$	5,066	$	—	$	5,066
Mortgage-Backed Securities - Commercial	Mortgage-Backed Securities - Commercial	0		330,468		0		330,468		Mortgage-Backed Securities - Commercial	—		329,228		—		329,228
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:									Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	0		718,627		0		718,627		Mortgage-Backed Securities - Residential	—		557,259		—		557,259

Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	0		990		0		990		Other Government-Sponsored Enterprises	—		935		—		935
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	0		9,681		0		9,681		Obligations of States and Political Subdivisions	—		8,922		—		8,922
Corporate Securities	Corporate Securities	0		24,437		0		24,437		Corporate Securities	—		31,794		—		31,794

Total Securities Available for Sale	Total Securities Available for Sale	0		1,090,530		0		1,090,530		Total Securities Available for Sale	—		933,204		—		933,204
Other Investments	Other Investments	0		9,857		1,670		11,527		Other Investments	—		11,972		1,170		13,142
Loans Held for Sale	Loans Held for Sale	0		19,530		0		19,530		Loans Held for Sale	—		10,506		—		10,506

Other Assets(a)	Other Assets(a)	0		39,252		7,448		46,700		Other Assets(a)	—		10,326		15,999		26,325
Total Assets	Total Assets	$	0	$	1,159,169	$	9,118	$	1,168,287	Total Assets	$	—	$	966,008	$	17,169	$	983,177
Other Liabilities(a)	Other Liabilities(a)	$	0	$	43,313	$	0	$	43,313	Other Liabilities(a)	$	—	$	34,496	$	—	$	34,496
Total Liabilities	Total Liabilities	$	0	$	43,313	$	0	$	43,313	Total Liabilities	$	—	$	34,496	$	—	$	34,496

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

3936

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2020									December 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Obligations of U.S. Government Agencies:	Obligations of U.S. Government Agencies:									Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	$	0	$	7,230	$	0	$	7,230	Mortgage-Backed Securities - Residential	$	—	$	5,662	$	—	$	5,662
Mortgage-Backed Securities - Commercial	Mortgage-Backed Securities - Commercial	0		191,180		0		191,180		Mortgage-Backed Securities - Commercial	—		362,290		—		362,290
Obligations of U.S. Government-Sponsored Enterprises:	Obligations of U.S. Government-Sponsored Enterprises:									Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	Mortgage-Backed Securities - Residential	0		496,033		0		496,033		Mortgage-Backed Securities - Residential	—		629,974		—		629,974

Other Government-Sponsored Enterprises	Other Government-Sponsored Enterprises	0		100,998		0		100,998		Other Government-Sponsored Enterprises	—		981		—		981
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	0		11,397		0		11,397		Obligations of States and Political Subdivisions	—		9,524		—		9,524
Corporate Securities	Corporate Securities	0		24,385		0		24,385		Corporate Securities	—		32,949		—		32,949

Total Securities Available for Sale	Total Securities Available for Sale	0		831,223		0		831,223		Total Securities Available for Sale	—		1,041,380		—		1,041,380
Other Investments	Other Investments	0		10,557		1,670		12,227		Other Investments	—		11,668		1,170		12,838
Loans Held for Sale	Loans Held for Sale	0		33,436		0		33,436		Loans Held for Sale	—		18,583		—		18,583
Premises and Equipment, net		0		442		0		442

Other Assets(a)	Other Assets(a)	0		54,362		6,619		60,981		Other Assets(a)	—		26,805		14,981		41,786
Total Assets	Total Assets	$	0	$	930,020	$	8,289	$	938,309	Total Assets	$	—	$	1,098,436	$	16,151	$	1,114,587
Other Liabilities(a)	Other Liabilities(a)	$	0	$	61,308	$	0	$	61,308	Other Liabilities(a)	$	—	$	34,263	$	—	$	34,263
Total Liabilities	Total Liabilities	$	0	$	61,308	$	0	$	61,308	Total Liabilities	$	—	$	34,263	$	—	$	34,263

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

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


		2021							2022
		Other Investments		Other Assets		Total				Other Investments		Other Assets		Total
		(dollars in thousands)							(dollars in thousands)
Balance, beginning of period	Balance, beginning of period	$	1,670	$	6,620	$	8,290	Balance, beginning of period		$	1,170	$	14,981	$	16,151
Total gains or losses	Total gains or losses							Total gains or losses
Included in earnings	Included in earnings	0		0		0		Included in earnings		—		—		—
Included in other comprehensive income	Included in other comprehensive income	0		0		0		Included in other comprehensive income		—		—		—
Purchases, issuances, sales and settlements	Purchases, issuances, sales and settlements							Purchases, issuances, sales and settlements
Purchases	Purchases	0		919		919		Purchases		—		1,043		1,043
Issuances	Issuances	0		0		0		Issuances		—		—		—
Sales	Sales	0		0		0		Sales		—		(25)		(25)
Settlements	Settlements	0		(91)		(91)		Settlements		—		—		—
Transfers from Level 3	Transfers from Level 3	0		0		0		Transfers from Level 3		—		—		—
Transfers into Level 3	Transfers into Level 3	0		0		0		Transfers into Level 3		—		—		—
Balance, end of period	Balance, end of period	$	1,670	$	7,448	$	9,118	Balance, end of period		$	1,170	$	15,999	$	17,169

4037

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		2020							2021
		Other Investments		Other Assets		Total				Other Investments		Other Assets		Total
		(dollars in thousands)							(dollars in thousands)
Balance, beginning of period	Balance, beginning of period	$	1,670	$	5,795	$	7,465	Balance, beginning of period		$	1,670	$	6,620	$	8,290
Total gains or losses	Total gains or losses							Total gains or losses
Included in earnings	Included in earnings	0		0		0		Included in earnings		—		—		—
Included in other comprehensive income	Included in other comprehensive income	0		0		0		Included in other comprehensive income		—		—		—
Purchases, issuances, sales and settlements	Purchases, issuances, sales and settlements							Purchases, issuances, sales and settlements
Purchases	Purchases	0		611		611		Purchases		—		390		390
Issuances	Issuances	0		0		0		Issuances		—		—		—
Sales	Sales	0		0		0		Sales		—		—		—
Settlements	Settlements	0		0		0		Settlements		—		—		—
Transfers from Level 3	Transfers from Level 3	0		0		0		Transfers from Level 3		—		—		—
Transfers into Level 3	Transfers into Level 3	0		0		0		Transfers into Level 3		—		—		—
Balance, end of period	Balance, end of period	$	1,670	$	6,406	$	8,076	Balance, end of period		$	1,670	$	7,010	$	8,680

During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 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~~March 31, 2022 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 Investments Other
Assets Total
(dollars in thousands)
Balance, beginning of period $ 1,670 $ 7,010 $ 8,680
Total gains or losses
Included in earnings 0 0 0
Included in other comprehensive income 0 0 0
Purchases, issuances, sales and settlements
Purchases 0 529 529
Issuances 0 0 0
Sales 0 0 0
Settlements 0 (91) (91)
Transfers from Level 3 0 0 0
Transfers into Level 3 0 0 0
Balance, end of period $ 1,670 $ 7,448 $ 9,118

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

2020
Other Investments Other
Assets Total
(dollars in thousands)
Balance, beginning of period $ 1,670 $ 6,223 $ 7,893
Total gains or losses
Included in earnings 0 0 0
Included in other comprehensive income 0 0 0
Purchases, issuances, sales and settlements
Purchases 0 183 183
Issuances 0 0 0
Sales 0 0 0
Settlements 0 0 0
Transfers from Level 3 0 0 0
Transfers into Level 3 0 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 2020.2021.

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


		June 30, 2021									March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	0	$	32,510	$	17,337	$	49,847	Nonperforming loans	$	—	$	25,306	$	11,810	$	37,116
Other real estate owned	Other real estate owned	0		655		0		655		Other real estate owned	—		732		—		732
Total Assets	Total Assets	$	0	$	33,165	$	17,337	$	50,502	Total Assets	$	—	$	26,038	$	11,810	$	37,848


		December 31, 2020									December 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(dollars in thousands)									(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	0	$	35,543	$	13,604	$	49,147	Nonperforming loans	$	—	$	42,538	$	12,247	$	54,785
Other real estate owned	Other real estate owned	0		1,319		0		1,319		Other real estate owned	—		729		—		729
Total Assets	Total Assets	$	0	$	36,862	$	13,604	$	50,466	Total Assets	$	—	$	43,267	$	12,247	$	55,514

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


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020					2022		2021
		(dollars in thousands)										(dollars in thousands)
Nonperforming loans	Nonperforming loans	$	(2,527)	$	191	$	(2,314)	$	(6,822)	Nonperforming loans			$	(171)	$	205
Other real estate owned	Other real estate owned	0		(26)		0		(76)		Other real estate owned			(54)		(6)
Total losses	Total losses	$	(2,527)	$	165	$	(2,314)	$	(6,898)	Total losses			$	(225)	$	199

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

4238

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The fair value for other real estate owned, determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement, is classified as Level 2. The fair value for other real estate owned, determined using an internal valuation, is classified as Level 3. Other real estate owned has a current carrying value of ~~$0.4~~$0.7 million as of ~~June 30, 2021~~March 31, 2022 and consists primarily of residential and commercial real estate properties in ~~Pennsylvania.~~Pennsylvania and Ohio. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.

Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 12, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. See Note 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.~~

4339

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

purchased and securities sold under agreement to repurchase, were used to approximate fair value due to the short-term nature of the borrowings.

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

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


		June 30, 2021											March 31, 2022
				Fair Value Measurements Using:											Fair Value Measurements Using:
		Carrying Amount		Total		Level 1		Level 2		Level 3			Carrying Amount		Total		Level 1		Level 2		Level 3
		(dollars in thousands)											(dollars in thousands)
Financial assets	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	89,505	$	89,505	$	89,505	$	0	$	0	Cash and due from banks	$	120,289	$	120,289	$	120,289	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	194,948		194,948		194,948		0		0		Interest-bearing deposits	404,516		404,516		404,516		—		—
Securities available for sale	Securities available for sale	1,090,530		1,090,530		0		1,090,530		0		Securities available for sale	933,204		933,204		—		933,204		—
Securities held to maturity	Securities held to maturity	554,225		555,820		0		555,820		0		Securities held to maturity	512,911		477,088		—		477,088		—
Other investments	Other investments	11,527		11,527		0		9,857		1,670		Other investments	13,142		13,142		—		11,972		1,170
Loans held for sale	Loans held for sale	19,530		19,530		0		19,530		0		Loans held for sale	10,506		10,506		—		10,506		—
Loans	Loans	6,740,535		7,117,132		0		32,510		7,084,622		Loans	6,952,112		7,154,726		—		25,306		7,129,420
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	7,885,019		7,885,040		0		7,885,040		0		Deposits	8,171,847		8,164,467		—		8,164,467		—
Short-term borrowings	Short-term borrowings	107,372		106,922		0		106,922		0		Short-term borrowings	95,748		93,203		—		93,203		—
Subordinated debt	Subordinated debt	170,694		174,902		0		0		174,902		Subordinated debt	170,815		168,231		—		—		168,231
Long-term debt	Long-term debt	5,918		6,617		0		6,617		0		Long-term debt	5,398		5,587		—		5,587		—
Capital lease obligation	Capital lease obligation	6,155		6,155		0		6,155		0		Capital lease obligation	5,799		5,799		—		5,799		—


		December 31, 2020											December 31, 2021
				Fair Value Measurements Using:											Fair Value Measurements Using:
		Carrying Amount		Total		Level 1		Level 2		Level 3			Carrying Amount		Total		Level 1		Level 2		Level 3
		(dollars in thousands)											(dollars in thousands)
Financial assets	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	100,009	$	100,009	$	100,009	$	0	$	0	Cash and due from banks	$	84,738	$	84,738	$	84,738	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	256,572		256,572		256,572		0		0		Interest-bearing deposits	310,634		310,634		310,634		—		—
Securities available for sale	Securities available for sale	831,223		831,223		0		831,223		0		Securities available for sale	1,041,380		1,041,380		—		1,041,380		—
Securities held to maturity	Securities held to maturity	361,844		369,851		0		369,851		0		Securities held to maturity	541,311		536,651		—		536,651		—
Other investments	Other investments	12,227		12,227		0		10,557		1,670		Other investments	12,838		12,838		—		11,668		1,170
Loans held for sale	Loans held for sale	33,436		33,436		0		33,436		0		Loans held for sale	18,583		18,583		—		18,583		—
Loans	Loans	6,761,183		7,202,763		0		35,543		7,167,220		Loans	6,839,230		7,169,768		—		42,538		7,127,230
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	7,438,666		7,440,906		0		7,440,906		0		Deposits	7,982,498		7,980,101		—		7,980,101		—
Short-term borrowings	Short-term borrowings	117,373		117,037		0		117,037		0		Short-term borrowings	138,315		136,473		—		136,473		—
Subordinated debt	Subordinated debt	170,612		165,665		0		0		165,665		Subordinated debt	170,775		175,040		—		—		175,040
Long-term debt	Long-term debt	56,258		57,881		0		57,881		0		Long-term debt	5,573		6,065		—		6,065		—
Capital lease obligation	Capital lease obligation	6,385		6,385		0		6,385		0		Capital lease obligation	5,921		5,921		—		5,921		—

4440

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11 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 39 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 1517 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~~During 2021, the Company entered into ~~three~~eight 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~~$500.0 million: $75.0 million with an original maturity of three years, ~~$150.0~~$250.0 million with an original maturity of four years and ~~$150.0~~$175.0 million with an original maturity of five years. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments on commercial loans benchmarked to the 1-month LIBOR rate. Therefore, the interest rate swaps convert the interest payments on the first ~~$325.0~~$500.0 million of 1-month LIBOR based commercial loans into fixed rate payments.

The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures" or "Interest and fees on loans" in the unaudited Consolidated Statements of Income. For the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, there was a positive impact of ~~$69 thousand and a negative impact of $157 thousand, respectively,~~$0.5 million on net interest income as a result of these interest rate swaps. Changes in the fair value of the cash flow hedges are reported on the balance sheet and in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in "Interest on subordinated debentures," or "Interest and fees on loans", the same line items in the unaudited Consolidated Statements of Income as the income on the hedged items. The cash flow hedges were highly effective at ~~June 30, 2021,~~March 31, 2022, and changes in the fair value attributed to hedge ineffectiveness were not material.

4541

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 six~~ months ended ~~June 30, 2021~~March 31, 2022 was a decrease of ~~$0.8~~$1.2 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 ~~June 30, 2021,~~March 31, 2022, the underlying funded mortgage loan commitments had a carrying value of ~~$14.5~~$6.9 million and a fair value of ~~$16.4~~$6.3 million, while the underlying unfunded mortgage loan commitments had a notional amount of ~~$40.0~~$38.6 million. At December 31, ~~2020,~~2021, the underlying funded mortgage loan commitments had a carrying value of ~~$25.0~~$11.0 million and a fair value of ~~$28.4~~$11.9 million, while the underlying unfunded mortgage loan commitments had a notional amount of ~~$47.9~~$29.7 million. The interest rate lock commitments ~~increased~~decreased other noninterest income by ~~$0.4~~$0.9 million for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022.

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 six~~ months ended ~~June 30, 2021~~March 31, 2022 totaled ~~$5 thousand, respectively.~~$1 thousand. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the underlying loans had a carrying value of ~~$2.3~~$1.4 million and ~~$2.1~~$2.0 million, respectively, and a fair value of ~~$2.3~~$1.4 million and ~~$2.1~~$2.0 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:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(dollars in thousands)					(dollars in thousands)
Derivatives not Designated as Hedging Instruments	Derivatives not Designated as Hedging Instruments					Derivatives not Designated as Hedging Instruments
Credit value adjustment	Credit value adjustment	$	(1,639)	$	(2,792)	Credit value adjustment	$	(48)	$	(395)
Notional amount:	Notional amount:					Notional amount:
Interest rate derivatives	Interest rate derivatives	692,606		631,446		Interest rate derivatives	672,534		708,759
Interest rate caps	Interest rate caps	66,267		66,527		Interest rate caps	65,823		66,007
Interest rate collars	Interest rate collars	35,354		35,354		Interest rate collars	35,354		35,354
Risk participation agreements	Risk participation agreements	227,943		220,280		Risk participation agreements	240,122		241,111
Sold credit protection on risk participation agreements	Sold credit protection on risk participation agreements	(86,852)		(78,522)		Sold credit protection on risk participation agreements	(77,114)		(95,618)
Interest rate options	Interest rate options	39,996		47,874		Interest rate options	38,612		29,691
Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments					Derivatives Designated as Hedging Instruments
Interest rate swaps:	Interest rate swaps:					Interest rate swaps:
Fair value adjustment	Fair value adjustment	(2,360)		(3,665)		Fair value adjustment	(24,948)		(7,022)
Notional amount	Notional amount	395,000		70,000		Notional amount	570,000		570,000
Interest rate forwards:	Interest rate forwards:					Interest rate forwards:
Fair value adjustment	Fair value adjustment	(82)		(483)		Fair value adjustment	837		(29)
Notional amount	Notional amount	41,000		65,000		Notional amount	41,000		38,000
Foreign exchange forwards:	Foreign exchange forwards:					Foreign exchange forwards:
Fair value adjustment	Fair value adjustment	20		(5)		Fair value adjustment	11		12
Notional amount	Notional amount	2,331		2,119		Notional amount	1,425		1,982

4642

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 June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020					2022		2021
		(dollars in thousands)										(dollars in thousands)
Non-hedging interest rate derivatives	Non-hedging interest rate derivatives									Non-hedging interest rate derivatives
(Decrease) increase in other income	(Decrease) increase in other income	$	(27)	$	1,672	$	309	$	(753)	(Decrease) increase in other income			$	(848)	$	336

Hedging interest rate derivatives	Hedging interest rate derivatives									Hedging interest rate derivatives

Increase in interest and fees on loans										Increase in interest and fees on loans			755		—
Increase in interest from subordinated debentures	Increase in interest from subordinated debentures	236		66		462		11		Increase in interest from subordinated debentures			224		226

Hedging interest rate forwards	Hedging interest rate forwards									Hedging interest rate forwards
Increase (decrease) in other income		641		(248)		(401)		234
Decrease in other income										Decrease in other income			(865)		(1,042)

Hedging foreign exchange forwards	Hedging foreign exchange forwards									Hedging foreign exchange forwards
Increase in other expense	Increase in other expense	3		8		5		12		Increase in other expense			1		2

The fair value of our derivatives is included in a table in Note 10, “Fair Values of Assets and Liabilities,” in the line items

“Other assets” and “Other liabilities.”

Note 12 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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was $303.3 million. ~~NaN~~No impairment charges on goodwill or other intangible assets were incurred in ~~2021~~2022 or ~~2020.~~2021.

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

As of ~~June 30, 2021,~~March 31, 2022, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

4743

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13 Subordinated Debentures

Subordinated debentures outstanding are as follows:


			June 30, 2021			December 31, 2020						March 31, 2022		December 31, 2021
		Due	Amount		Rate	Amount		Rate		Due	Rate	Amount			Amount
			(dollars in thousands)									(dollars in thousands)
Owed to:	Owed to:								Owed to:

First Commonwealth Bank	First Commonwealth Bank	2028	$	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 Bank	2028	4.875% until June 1, 2023, then 3-Month LIBOR + 1.845%	$	49,430		$	49,407
First Commonwealth Bank	First Commonwealth Bank	2033	49,166		5.50% until June 1, 2028, then LIBOR + 2.37%	49,131		5.50% until June 1, 2028, then LIBOR + 2.37%	First Commonwealth Bank	2033	5.50% until June 1, 2028, then 3-Month LIBOR + 2.37%	49,218			49,201
First Commonwealth Capital Trust II	First Commonwealth Capital Trust II	2034	30,929		LIBOR + 2.85%	30,929		LIBOR + 2.85%	First Commonwealth Capital Trust II	2034	3-Month LIBOR + 2.85%	30,929			30,929
First Commonwealth Capital Trust III	First Commonwealth Capital Trust III	2034	41,238		LIBOR + 2.85%	41,238		LIBOR + 2.85%	First Commonwealth Capital Trust III	2034	3-Month LIBOR + 2.85%	41,238			41,238
Total	Total		$	170,694		$	170,612		Total			$	170,815		$	170,775

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

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

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

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

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

In order to reduce its exposure to variability in expected future cash flows related to interest payments on First Commonwealth Capital Trust II and III, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These contracts fix the LIBOR based portion of the interest rate on Capital Trust II at 1.515% until August 15, 2024 and ~~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 11- "Derivatives".

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

Note 14 Revenue Recognition

Substantially all of the Company’s revenue is generated from contracts with customers. Revenue associated with financial instruments, including revenue from loans and securities, certain noninterest income streams such as fees associated with derivatives are not in scope of ASC Topic 606 - Revenue from Contracts with Customers. ASC Topic 606 is applicable to

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

noninterest revenue streams such as trust income, service charges on deposits, insurance and retail brokerage commissions, card-related interchange income and gain(loss) on sale of OREO. For contracts within the scope of ASC Topic 606, the Company immediately expenses contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.

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

Trust Income

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

Service Charges on Deposit Accounts

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

Insurance and Retail Brokerage Commissions

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

Retail brokerage income primarily consists of commissions received on annuity and investment product sales through a third-party service provider. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy or the execution of an investment transaction. The Company does not earn a significant amount of trailer fees on annuity sales. However, after considering the factors impacting these trailer fees, such as the uncertainty of investor behavior and changes in the market value of assets, First Commonwealth determined that it would recognize trailing fees as received because it could not reasonably estimate an amount of future trailing commissions for which collection is probable. Commissions from the third-party service provider are received on a monthly basis based upon customer activity for the month. The fees are recognized monthly with a receivable until commissions are received from the third-party service provider the following month. Because the Company acts as an agent in arranging the relationship between the customer and the third-party service provider and does not control the services rendered to the customers, retail brokerage fees are presented net of related costs, including $0.9 million and $0.9 million in commission expense as of March 31, 2022 and 2021, respectively.

4945

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 $0.9 million and $0.8 million in commission expense as of June 30, 2021 and 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.~~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.

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


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended March 31,
		2021		2020		2021		2020					2022		2021
		(dollars in thousands)										(dollars in thousands)
Noninterest Income	Noninterest Income									Noninterest Income
In-scope of Topic 606:	In-scope of Topic 606:									In-scope of Topic 606:
Trust income	Trust income	$	2,706	$	2,109	$	5,222	$	4,220	Trust income			$	2,713	$	2,516
Service charges on deposit accounts	Service charges on deposit accounts	4,310		3,286		8,357		8,031		Service charges on deposit accounts			4,615		4,047
Insurance and retail brokerage commissions	Insurance and retail brokerage commissions	1,978		1,831		4,150		3,826		Insurance and retail brokerage commissions			2,272		2,172
Card-related interchange income	Card-related interchange income	7,406		5,886		13,833		11,148		Card-related interchange income			6,490		6,427
Gain on sale of other loans and assets	Gain on sale of other loans and assets	337		173		506		332		Gain on sale of other loans and assets			43		169
Other income	Other income	1,103		824		2,083		1,768		Other income			975		980
Noninterest Income (in-scope of Topic 606)	Noninterest Income (in-scope of Topic 606)	17,840		14,109		34,151		29,325		Noninterest Income (in-scope of Topic 606)			17,108		16,311
Noninterest Income (out-of-scope of Topic 606)	Noninterest Income (out-of-scope of Topic 606)	8,246		7,703		19,290		11,760		Noninterest Income (out-of-scope of Topic 606)			6,868		11,044
Total Noninterest Income	Total Noninterest Income	$	26,086	$	21,812	$	53,441	$	41,085	Total Noninterest Income			$	23,976	$	27,355

5046

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 six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 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~~Quarterly Report on Form 10-Q that are not statements of historical ~~facts may~~fact constitute ~~“forward-looking statements”~~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 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute ~~“forward-looking statements” as well. These~~forward-looking statements ~~which~~within the meaning of the Act. Examples of forward-looking statements include, but are ~~based on certain assumptions~~not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and ~~describe our future~~other financial items; (ii) statements of plans, ~~strategies~~objectives and expectations ~~can generally be identified by the use~~ of ~~words~~First Commonwealth or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as ~~“may,~~“believe,” ~~“will,~~“anticipate,” ~~“should,~~“expect,” ~~“could,” “would,~~“intend,” “plan,” ~~“believe,~~“estimate,” ~~“expect,” “anticipate,” “intend,” “estimate”~~ or words of similar ~~meaning. These~~meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may,” are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are ~~subject to significant risks, assumptions~~not limited to:

•Local, regional, national and ~~uncertainties, including uncertainties regarding~~international economic conditions and the impact they may have on us and our customers and our assessment of ~~the COVID-19 pandemic, and could be affected by many factors, including, but not limited to: (1) the impact of the COVID-19 pandemic on First Commonwealth and its customers; (2) volatility~~that impact.

•Volatility and disruption in national and international financial ~~markets; (3)~~markets.

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

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

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

•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve ~~Board; (4) inflation,~~Board.

•Inflation, interest rate, ~~commodity price,~~ securities market and monetary ~~fluctuations; (5) the~~fluctuations.

•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~~we and our subsidiaries must ~~comply; (6) the~~comply.

•The soundness of other financial ~~institutions; (7) political instability; (8) impairment~~institutions.

•Political instability.

•Impairment of ~~First Commonwealth’s~~our goodwill or other intangible ~~assets; (9) acts~~assets.

•Acts of God or of war or ~~terrorism; (10) the~~terrorism.

•The timely development and acceptance of new products and services and perceived overall value of these products and services by ~~users; (11) changes~~users.

•Changes in consumer spending, borrowings and savings ~~habits; (12) changes~~habits.

•Changes in the financial performance and/or condition of ~~First Commonwealth’s borrowers; (13) technological changes; (14) acquisitions~~our borrowers.

•Technological changes.

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

•Acquisitions and integration of acquired ~~businesses; (15) First Commonwealth’s~~businesses.

•Our ability to increase market share and control expenses.

•Our ability to attract and retain qualified ~~employees; (16) changes~~employees.

•Changes in the competitive environment in ~~First Commonwealth’s~~our markets and among banking organizations and other financial service ~~providers; (17) the ability to increase market share and control expenses; (18) the~~providers.

•The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard ~~setters; (19)~~setters.

•Changes in the reliability of ~~First Commonwealth’s~~our vendors, internal control systems or information ~~systems; (20)~~systems.

•Changes in our liquidity position.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

•Changes in our organization, compensation and benefit plans.

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

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

•Greater than expected costs or difficulties related to the integration of new products and ~~(21) other~~lines of business.

•Our success at managing the risks ~~and uncertainties described in this report and~~involved in the ~~other reports that we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. Further,~~foregoing items.

Forward-looking statements ~~about the potential effects~~speak only as of the ~~COVID-19 pandemic~~date on ~~our business, financial condition, liquidity and results of operations may constitute forward-looking~~which such statements ~~and~~ are ~~subject~~made. We do not undertake any obligation 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~~update any forward-looking ~~statements in this report. We undertake no obligation~~statement to ~~publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future~~reflect events or ~~otherwise.~~circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Explanation of Use of Non-GAAP Financial Measure

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-~~

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~GAAP~~non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages ~~55 and 63~~51 for the ~~six and~~ three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020, respectively.~~2021.

5248

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 June 30,						For the Six Months Ended June 30,							For the Three Months Ended March 31,
		2021			2020			2021			2020					2022			2021
		(dollars in thousands, except per share data)														(dollars in thousands, except per share data)
Net Income	Net Income	$	29,619		$	23,851		$	69,389		$	28,578		Net Income		$	27,726		$	39,770
Per Share Data:	Per Share Data:													Per Share Data:
Per Share Data: Basic Earnings per Share		$	0.31		$	0.24		$	0.72		$	0.29
Basic Earnings per Share														Basic Earnings per Share		$	0.29		$	0.41
Diluted Earnings per Share	Diluted Earnings per Share	0.31			0.24			0.72			0.29			Diluted Earnings per Share		0.29			0.41
Cash Dividends Declared per Common Share	Cash Dividends Declared per Common Share	0.12			0.11			0.23			0.22			Cash Dividends Declared per Common Share		0.115			0.110
Average Balance:	Average Balance:													Average Balance:
Total assets	Total assets	$	9,451,683		$	9,043,554		$	9,291,956		$	8,690,437		Total assets		$	9,524,578		$	9,130,454
Total equity	Total equity	1,098,094			1,071,549			1,087,384			1,071,433			Total equity		1,107,415			1,076,555
End of Period Balance:	End of Period Balance:													End of Period Balance:
Net loans (1)								$	6,663,027		$	6,871,043
Net loans and leases (1)														Net loans and leases (1)		$	6,871,430		$	6,660,735
Total assets	Total assets							9,402,402			9,364,655			Total assets		9,642,124			9,416,989
Total deposits	Total deposits							7,885,019			7,782,201			Total deposits		8,171,847			7,869,256
Total equity	Total equity							1,106,419			1,075,705			Total equity		1,067,619			1,087,480
Key Ratios:	Key Ratios:													Key Ratios:
Return on average assets	Return on average assets	1.26		%	1.06		%	1.51		%	0.66		%	Return on average assets		1.18		%	1.77		%
Return on average equity	Return on average equity	10.82		%	8.95		%	12.87		%	5.36		%	Return on average equity		10.15		%	14.98		%
Dividends payout ratio	Dividends payout ratio	38.71		%	45.83		%	31.94		%	75.86		%	Dividends payout ratio		39.66		%	26.83		%
Average equity to average assets ratio	Average equity to average assets ratio	11.62		%	11.85		%	11.70		%	12.33		%	Average equity to average assets ratio		11.63		%	11.79		%
Net interest margin	Net interest margin	3.17		%	3.29		%	3.29		%	3.46		%	Net interest margin		3.19		%	3.40		%
Net loans to deposits ratio	Net loans to deposits ratio							84.50		%	88.29		%	Net loans to deposits ratio		84.09		%	84.64		%

(1) Includes loans held for sale.

Results of Operations

~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022 Compared to ~~Six~~Three Months Ended ~~June 30, 2020~~March 31, 2021

Net Income

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, First Commonwealth had net income of ~~$69.4~~$27.7 million, or ~~$0.72~~$0.29 diluted earnings per share, compared to net income of ~~$28.6~~$39.8 million, or ~~$0.29~~$0.41 diluted earnings per share, in the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. The ~~increase~~decrease in net income was primarily the result of a ~~$1.0~~$2.0 million provision for credit losses recognized during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$37.8~~a negative provision of $4.4 million recognized in the same period in ~~2020.~~2021. Additionally, noninterest income decreased $3.4 million and noninterest expense increased ~~$12.4~~$3.9 million during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. These increases were partially offset by a $11.2 million increase in the income tax provision due to higher income before income taxes.~~2021.

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company’s return on average equity was ~~12.87%~~10.15% and its return on average assets was ~~1.51%~~1.18%, compared to ~~5.36%~~14.98% and ~~0.66%~~1.77%, respectively, for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

Net Interest Income

Net interest income, on a fully taxable equivalent basis, was ~~$138.2~~$68.4 million in the first ~~six~~three months of ~~2021,~~2022, compared to ~~$135.2~~$69.8 million for the same period in ~~2020.~~2021. The ~~increase~~decrease in net interest income can be attributed to a 4130 basis point decrease in the yield on interest-earning assets, partially offset by a 12 basis point decrease in the cost of interest-bearing liabilities ~~offset by a 48 basis point decrease in the yield on interest-earning assets~~ and a ~~$634.8~~$391.2 million increase in interest-earning assets. Net interest income comprises the majority of our operating revenue (net ~~interest income~~

5349

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

interest income before provision expense plus noninterest income), at ~~72.0%~~74.0% and ~~76.6%~~71.7% for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

The net interest margin on a fully taxable equivalent basis was ~~3.29%~~3.19% and ~~3.46%~~3.40% for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and March 31, 2021, ~~and June 30, 2020,~~ respectively. The decline in the net interest margin is primarily attributable to ~~the lower 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 ~~3.49%~~3.33% for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, a decrease of 4830 basis points compared to the ~~3.97%~~3.63% yield for the same period in ~~2020. This~~2021. Contributing to this decrease is ~~largely~~a $438.2 million decline in average PPP loans, which yield higher rates than the remainder of the loan portfolio. As the PPP loans paid off, due to ~~a decline~~forgiveness by the US Government, the funds were used to fund growth in the loan ~~portfolio yield, which decreased by 34 basis points when compared to~~and investment portfolios. Additionally, replacement yields on certain loan categories, including commercial variable loans, were lower than the ~~six months ended June 30, 2020. Contributing to this decline was the yield~~rates on ~~our adjustable and variable rate commercial loan portfolio, which declined 78 basis points as a result of the Federal Reserve's decrease of short-term interest rates~~runoff in ~~March 2020. During the first quarter of 2020, the Federal Reserve decreased the Federal Funds target rate by 150 basis points.~~those categories.

The loan yield for the ~~six~~three months ended ~~June~~March 31, 2022, decreased 30 ~~2021,~~basis points compared to the same period in 2021. The decrease was ~~impacted by $459.5 million~~primarily due to a decline in average PPP loans ~~outstanding during the period.~~outstanding. These loans, which were originated under the CARES Act, had an average balance of $51.1 million and ~~have~~ a stated loan rate of 1% and a yield of ~~5.89%~~13.93% for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, PPP loans averaged ~~$202.9~~$489.4 million with a yield of ~~2.7%~~6.58%. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of ~~$11.2~~$1.5 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. These amounts are recognized in interest income as a yield adjustment over the life of the loan with accelerated recognition when a loan is forgiven or paid off. As of ~~June 30, 2021,~~March 31, 2022, we expect to recognize additional PPP-related deferred processing fees, net of origination costs, of approximately ~~$12.3~~$0.9 million as an adjustment to yield over the remaining terms of the loans. The balance of PPP loans outstanding at ~~June 30, 2021~~March 31, 2022 totaled ~~$292.4~~$28.9 million. During the three months ended March 31, 2022, PPP loans generated $1.8 million in income compared to $7.9 million during the same period in 2021. For the three months ended March 31, 2022, PPP loans increased the yield on total loans by 147 basis points and the net interest margin by 156 basis ~~points during~~points. During the ~~six~~three months ended ~~June 30, 2021. During~~March 31, 2022, the ~~six months ended June 30, 2021, the~~ Company ~~originated $255.8 million in new PPP loans and~~ processed forgiveness on ~~$438.5~~$43.0 million of PPP loans originated in prior quarters.

The investment portfolio yield decreased 5215 basis points in comparison to the prior year as a result of $335.5 million in average growth at a time when new volume rates were lower ~~short-term interest rates. Investment~~than the portfolio ~~purchases during~~yield. Growth in the six months ended June 30, 2021 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 four to five years. Additionally, asinvestment portfolio is a result of ~~excess liquidity caused by significant~~continued deposit growth as well as a decline in ~~deposits during the past year, the average balance of~~ interest-bearing deposits with banks, ~~primarily represented by deposits placed with the Federal Reserve, has increased~~which decreased from ~~$86.8~~$340.8 million in ~~2020~~2021 to ~~$349.7~~$284.4 million in ~~2021.~~2022. The ~~impact of~~change in the level and rate paid on interest-bearing deposits with banks decreased the yield on earning assets by 1411 basis points for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

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 ~~0.31%~~0.22% for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, from ~~0.72%~~0.34% for the same period in 2020. Deposit growth due to the retention of PPP loan proceeds and the deposit of Federal stimulus checks combined to contribute to a decline in average short-term borrowings of $40.0 million for the six months ended June 30, 2021 compared to the same period in 2020.2021. Lower market interest rates and management's efforts to reduce deposit costs resulted in the cost of interest-bearing deposits decreasing 4110 basis points and short-term borrowings decreasing 714 basis points in comparison to the same period last year.

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, changes in interest rates negatively impacted net interest income by ~~$6.1~~$4.8 million when compared with the same period in ~~2020.~~2021. The lower yield on interest-earning assets negatively impacted net interest income by ~~$15.4~~$5.6 million, while the decrease in the cost of interest-bearing liabilities positively impacted net interest income by ~~$9.2~~$0.8 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by ~~$9.2~~$3.5 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020.~~2021. Higher levels of interest-earning assets resulted in an increase of ~~$7.0~~$2.7 million in interest income, and changes in the volume and mix of interest-bearing liabilities decreased interest expense by ~~$2.2~~$0.8 million, primarily due to a decrease in ~~time deposits.~~long-term debt. Average earning assets for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 increased ~~$634.8~~$391.2 million, or ~~8.1%~~4.7%, compared to the same period in ~~2020.~~2021. Average loans for the comparable period increased ~~$259.7~~$112.2 million, or ~~4.0%~~1.7%.

Net interest income also benefited from a ~~$657.1~~$223.2 million increase in average net free funds at ~~June 30, 2021~~March 31, 2022 as compared to ~~June 30, 2020.~~March 31, 2021. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of ~~$606.3~~$231.7 million, or ~~31.8%~~9.6%, in noninterest-bearing demand deposit average balances, primarily due to deposit growth related to PPP loan proceeds and government stimulus payments. Average time deposits for the three months ended March 31, 2022 decreased by $153.8 million compared to the comparable period in 2021, while the average rate paid on time deposits decreased 46 basis points compared to the same period in 2021.

5450

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

growth 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 2020, while the average rate paid on time deposits decreased 96 basis points compared to the same period in 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 ~~six~~three months ended ~~June 30:~~March 31:


		2021		2020			2022		2021
		(dollars in thousands)					(dollars in thousands)
Interest income per Consolidated Statements of Income	Interest income per Consolidated Statements of Income	$	146,112	$	154,310	Interest income per Consolidated Statements of Income	$	71,244	$	74,061
Adjustment to fully taxable equivalent basis	Adjustment to fully taxable equivalent basis	598		755		Adjustment to fully taxable equivalent basis	253		309
Interest income adjusted to fully taxable equivalent basis (non-GAAP)	Interest income adjusted to fully taxable equivalent basis (non-GAAP)	146,710		155,065		Interest income adjusted to fully taxable equivalent basis (non-GAAP)	71,497		74,370
Interest expense	Interest expense	8,471		19,900		Interest expense	3,072		4,619
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	138,239	$	135,165	Net interest income adjusted to fully taxable equivalent basis (non-GAAP)	$	68,425	$	69,751

5551

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 ~~six~~three months ended ~~June 30:~~March 31:


		2021						2020							2022						2021
		Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate			Average Balance		Income / Expense (a)		Yield or Rate		Average Balance		Income / Expense (a)		Yield or Rate
		(dollars in thousands)													(dollars in thousands)
Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	349,747	$	167	0.10	%	$	86,804	$	69	0.16	%	Interest-bearing deposits with banks	$	284,367	$	111	0.16	%	$	340,800	$	77	0.09	%
Tax-free investment securities	Tax-free investment securities	29,539		402		2.74		47,950		737		3.09		Tax-free investment securities	24,430		160		2.66		29,695		208		2.84
Taxable investment securities	Taxable investment securities	1,329,843		11,947		1.81		1,199,233		13,843		2.32		Taxable investment securities	1,500,334		6,613		1.79		1,159,612		5,507		1.93
Loans, net of unearned income (b)(c)		6,776,560		134,194		3.99		6,516,854		140,416		4.33
Loans and leases, net of unearned income (b)(c)														Loans and leases, net of unearned income (b)(c)	6,893,628		64,613		3.80		6,781,451		68,578		4.10
Total interest-earning assets	Total interest-earning assets	8,485,689		146,710		3.49		7,850,841		155,065		3.97		Total interest-earning assets	8,702,759		71,497		3.33		8,311,558		74,370		3.63
Noninterest-earning assets:	Noninterest-earning assets:													Noninterest-earning assets:
Cash	Cash	92,243						97,129						Cash	114,672						90,844
Allowance for credit losses	Allowance for credit losses	(104,239)						(66,705)						Allowance for credit losses	(93,645)						(106,197)
Other assets	Other assets	818,263						809,172						Other assets	800,792						834,249
Total noninterest-earning assets	Total noninterest-earning assets	806,267						839,596						Total noninterest-earning assets	821,819						818,896
Total Assets	Total Assets	$	9,291,956					$	8,690,437					Total Assets	$	9,524,578					$	9,130,454
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity													Liabilities and Shareholders’ Equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing demand deposits (d)	Interest-bearing demand deposits (d)	$	1,503,501	$	220	0.03	%	$	1,465,901	$	1,469	0.20	%	Interest-bearing demand deposits (d)	$	1,551,979	$	100	0.03	%	$	1,445,653	$	108	0.03	%
Savings deposits (d)	Savings deposits (d)	3,228,379		1,750		0.11		2,925,862		6,354		0.44		Savings deposits (d)	3,428,411		449		0.05		3,158,169		971		0.12
Time deposits	Time deposits	493,259		1,515		0.62		801,429		6,312		1.58		Time deposits	374,484		264		0.29		528,265		973		0.75
Short-term borrowings	Short-term borrowings	117,155		58		0.10		157,188		635		0.81		Short-term borrowings	115,544		21		0.07		119,369		31		0.11
Long-term debt	Long-term debt	219,731		4,928		4.52		233,934		5,130		4.41		Long-term debt	182,119		2,238		4.98		233,113		2,536		4.41
Total interest-bearing liabilities	Total interest-bearing liabilities	5,562,025		8,471		0.31		5,584,314		19,900		0.72		Total interest-bearing liabilities	5,652,537		3,072		0.22		5,484,569		4,619		0.34
Noninterest-bearing liabilities and shareholders’ equity:	Noninterest-bearing liabilities and shareholders’ equity:													Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	2,509,818						1,903,568						Noninterest-bearing demand deposits	2,645,551						2,413,887
Other liabilities	Other liabilities	132,729						131,122						Other liabilities	119,075						155,443
Shareholders’ equity	Shareholders’ equity	1,087,384						1,071,433						Shareholders’ equity	1,107,415						1,076,555
Total Noninterest-Bearing Funding Sources	Total Noninterest-Bearing Funding Sources	3,729,931						3,106,123						Total Noninterest-Bearing Funding Sources	3,872,041						3,645,885
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	9,291,956					$	8,690,437					Total Liabilities and Shareholders’ Equity	$	9,524,578					$	9,130,454
Net Interest Income and Net Yield on Interest-Earning Assets	Net Interest Income and Net Yield on Interest-Earning Assets			$	138,239	3.29	%			$	135,165	3.46	%	Net Interest Income and Net Yield on Interest-Earning Assets			$	68,425	3.19	%			$	69,751	3.40	%

(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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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

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

5652

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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared with ~~June 30, 2020:~~March 31, 2021:

Analysis of Year-to-Year Changes in Net Interest Income
Total
Change Change Due To
Volume Change Due To
Rate (a)
(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks $ 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)


	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	$	34	$	(13)	$	47
Tax-free investment securities	(48)		(37)		(11)
Taxable investment securities	1,106		1,621		(515)
Loans and leases	(3,965)		1,134		(5,099)
Total interest income (b)	(2,873)		2,705		(5,578)
Interest-bearing liabilities:
Interest-bearing demand deposits	(8)		8		(16)
Savings deposits	(522)		80		(602)
Time deposits	(709)		(284)		(425)
Short-term borrowings	(10)		(1)		(9)
Long-term debt	(298)		(555)		257
Total interest expense	(1,547)		(752)		(795)
Net interest income	$	(1,326)	$	3,457	$	(4,783)

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

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

Provision for Credit Losses

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

5753

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~~three months ended ~~June 30:~~March 31:


		2021				2020					2022				2021
		Dollars		Percentage		Dollars		Percentage			Dollars		Percentage		Dollars		Percentage
		(dollars in thousands)									(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	8,542	292	%	$	6,549	17	%	Commercial, financial, agricultural and other	$	3,023	(1,511)	%	$	5,093	(399)	%
Time and demand	Time and demand	8,410		287						Time and demand	3,715		(1,857)		4,960		(389)
Commercial credit cards	Commercial credit cards	132		5						Commercial credit cards	113		(56)		133		(10)
Equipment finance										Equipment finance	31		(16)
Time and demand other										Time and demand other	(836)		418
Real estate construction	Real estate construction	(3,816)		(130)		654		2		Real estate construction	710		(355)		(3,945)		309
Construction other										Construction other	(103)		52
Construction residential										Construction residential	813		(407)
Residential real estate	Residential real estate	(1,517)		(52)		5,650		15		Residential real estate	4,213		(2,107)		(1,461)		115
Residential first lien	Residential first lien	(671)		(23)						Residential first lien	3,683		(1,842)		(692)		55
Residential junior lien/home equity	Residential junior lien/home equity	(846)		(29)						Residential junior lien/home equity	530		(265)		(769)		60
Commercial real estate	Commercial real estate	(4,641)		(159)		17,091		45		Commercial real estate	314		(157)		(2,774)		217
Multifamily	Multifamily	(1,860)		(64)						Multifamily	49		(25)		(1,988)		156
Nonowner occupied	Nonowner occupied	13		—						Nonowner occupied	(1,576)		788		985		(77)
Owner occupied	Owner occupied	(2,794)		(95)						Owner occupied	1,841		(920)		(1,771)		138
Loans to individuals	Loans to individuals	4,358		149		7,882		21		Loans to individuals	(8,460)		4,230		1,811		(142)
Automobile		3,658		125
Automobile and recreational vehicles										Automobile and recreational vehicles	(8,460)		4,230		1,254		(98)
Consumer credit cards	Consumer credit cards	98		3						Consumer credit cards	(29)		15		205		(16)
Consumer other	Consumer other	602		21						Consumer other	29		(15)		352		(28)

Provision for credit losses on loans		$	2,926	100	%	$	37,826	100	%
Provision for credit losses on loans and leases										Provision for credit losses on loans and leases	$	(200)	100	%	$	(1,276)	100	%
Provision for off-balance sheet credit exposure	Provision for off-balance sheet credit exposure	(1,903)				—				Provision for off-balance sheet credit exposure	2,164				(3,114)
Total provision for credit losses	Total provision for credit losses	$	1,023			$	37,826			Total provision for credit losses	$	1,964			$	(4,390)

The provision for credit losses on loans and leases for the ~~six~~three months ended ~~June 30, 2021 decreased~~March 31, 2022 increased in comparison to the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 by ~~$34.9 million. The level of~~$1.1 million, however both periods reflect a negative provision. Total provision expense in the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is primarily the result of growth in off-balance sheet commitments as well as an ~~improved economic forecast,~~annual review of peer loss history data which ~~reflects a decline~~resulted in higher loss rates for construction related commitments. Comparing the ~~impact of~~three months ended March 31, 2022 with the ~~COVID-19 pandemic on~~comparable period in 2021, the ~~economy and expected loan losses. The~~ provision for credit losses on loans and leases was also impacted by a decrease of ~~$3.9~~$2.8 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,~~For the three months ended March 31, 2022, increases in provision expense for Time and demand and Residential first lien as well as the negative provision for Automobile and recreational vehicles are primarily the result of an annual review of peer loss history data used in the Allowance for Credit Loss model. Provision expense was also impacted by loan growth in these categories.

The negative provision expense for the three months ended March 31, 2021 was primarily the result of an improved economic forecast ~~provided for~~which reflected 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~~decline in the ~~first six months~~projected impact of ~~2020 was primarily to build the allowance for loan loss in order to provide for credit losses related to~~ the COVID-19 ~~pandemic. Contributing to~~pandemic on the higher provision during the six months ended June 30, 2020 was $5.9 million in specific reserves for four commercial real estate borrowers that were placed on nonaccrual status during the first six months of 2020. Additionally, $22.3 million of the provision expense was attributable to higher qualitative reserves due the uncertain economic environment resulting from COVID-19. Net charge-offs during the first six months of 2020 totaled $8.0 million.economy and expected loan losses.

The allowance for credit losses was ~~$97.0~~$91.2 million, or ~~1.44%~~1.31%, of total loans outstanding at ~~June 30, 2021,~~March 31, 2022, compared to ~~$101.3~~$92.5 million, or ~~1.50%~~1.35%, at December 31, ~~2020~~2021 and ~~$81.4~~$96.8 million, or ~~1.18%~~1.44%, at ~~June 30, 2020.~~March 31, 2021. Nonperforming loans as a percentage of total loans decreased to ~~0.78%~~0.54% at ~~June 30, 2021~~March 31, 2022 from ~~0.80%~~0.81% at December 31, ~~2020~~2021 and ~~0.81%~~0.75% as of ~~June 30, 2020.~~March 31, 2021. The allowance to nonperforming loan ratio was ~~183.81%~~243.38%, ~~187.43%~~167.67% and ~~145.37%~~192.06% as of ~~June 30, 2021,~~March 31, 2022, December 31, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at ~~June 30, 2021.~~March 31, 2022.

5854

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 ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ and the year-ended December 31, ~~2020:~~2021:

June 30, 2021 June 30, 2020 December 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 other 4,456 1,771 6,318
Real estate construction — — —
Residential real estate 119 650 1,040
Commercial real estate 1,557 2,417 4,939
Loans to individuals 2,472 4,016 6,953
Total loans charged off 8,604 8,854 19,250
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other 193 132 314
Real estate construction 135 26 26
Residential real estate 211 146 414
Commercial real estate 40 44 312
Loans to individuals 828 484 991
Total recoveries 1,407 832 2,057
Net charge-offs 7,197 8,022 17,193
Provision for credit losses on loans charged to expense 2,926 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 outstanding 1.44 % 1.18 % 1.50 %
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans 1.50 % 1.28 % 1.61 %

~~(1)~~ ~~CECL was adopted on December 31, 2020 in accordance with relief provided under the CARES Act.~~


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

Loans charged off:
Commercial, financial, agricultural and other	475			569			7,020
Real estate construction	—			—			9
Residential real estate	139			105			309
Commercial real estate	—			1,550			1,659
Loans to individuals	1,009			1,541			4,061
Total loans charged off	1,623			3,765			13,058
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	80			90			2,430
Real estate construction	—			—			155
Residential real estate	29			37			468
Commercial real estate	14			39			135
Loans to individuals	366			329			1,460
Total recoveries	489			495			4,648
Net charge-offs	1,134			3,270			8,410
Provision for credit losses on loans charged to expense	(200)			(1,276)			(377)
Balance, end of period	$	91,188		$	96,763		$	92,522
Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.07		%	0.20		%	0.12		%
Allowance for credit losses as a percentage of end-of-period loans outstanding	1.31		%	1.44		%	1.35		%
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans	1.32		%	1.55		%	1.37		%

5955

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 ~~six~~three months ended ~~June 30:~~March 31:
2021 2020 $ Change % Change
(dollars in thousands)
Noninterest Income:
Trust income $ 5,222 $ 4,220 $ 1,002 24 %
Service charges on deposit accounts 8,357 8,031 326 4
Insurance and retail brokerage commissions 4,150 3,826 324 8
Income from bank owned life insurance 3,460 3,416 44 1
Card-related interchange income 13,833 11,148 2,685 24
Swap fee income 1,398 823 575 70
Other income 3,921 3,487 434 12
Subtotal 40,341 34,951 5,390 15
Net securities gains 16 27 (11) (41)
Gain on sale of mortgage loans 8,130 6,789 1,341 20
Gain on sale of other loans and assets 3,801 1,280 2,521 197
Derivatives mark to market 1,153 (1,962) 3,115 (159)
Total noninterest income $ 53,441 $ 41,085 $ 12,356 30 %


	2022		2021		$ Change		% Change
	(dollars in thousands)
Noninterest Income:
Trust income	$	2,713	$	2,516	$	197	8	%
Service charges on deposit accounts	4,615		4,047		568		14
Insurance and retail brokerage commissions	2,272		2,172		100		5
Income from bank owned life insurance	1,508		1,951		(443)		(23)
Card-related interchange income	6,490		6,427		63		1
Swap fee income	453		146		307		210
Other income	1,975		1,924		51		3
Subtotal	20,026		19,183		843		4
Net securities gains	2		6		(4)		(67)
Gain on sale of mortgage loans	1,282		5,046		(3,764)		(75)
Gain on sale of other loans and assets	2,319		1,690		629		37
Derivatives mark to market	347		1,430		(1,083)		(76)

Total noninterest income	$	23,976	$	27,355	$	(3,379)	(12)	%

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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 increased ~~$5.4~~$0.8 million, or ~~15%~~4%, compared to the ~~six~~three months ended ~~June 30, 2020. Card-related interchange income~~March 31, 2021. Service charges on deposit accounts increased ~~$2.7 million due to growth in customer accounts and transactions. Trust income increased $1.0~~$0.6 million as ~~a result of growth in assets under management,~~customer activity began to return to pre-COVID levels and swap fee income increased ~~$0.6~~$0.3 million due to growth in interest rate swaps entered into for our commercial customers. Trust income increased $0.2 million as a result of growth in assets under management. Income from bank owned life insurance decreased $0.4 million compared to the prior period due to recognition of a benefit during the three months ended March 31, 2021 with no similar benefit during the three months ended March 31, 2022.

Total noninterest income ~~increased $12.4~~decreased $3.4 million, or ~~30%~~12%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include ~~$3.1~~a $3.8 million decrease in Gain on sale of mortgage loans as a result of changes in volume and the spread received on mortgage loans sold. The mark to market adjustment on interest rate swaps entered into for our commercial ~~customers.~~loan customers decreased $1.1 million. This adjustment does not reflect a realized gain on the swaps, but rather relates to changes in fair value due to movements in corporate bond spreads and swap rates. The gain on sale of other loans and assets increased ~~$2.5~~$0.6 million due to a higher volume of loans, primarily SBA loans, being sold in the first ~~six~~three months of ~~2021~~2022 compared to the same period in ~~2020. Gain on sale of mortgage loans increased $1.3 million as a result of growth in our mortgage lending area.~~2021.

6056

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 ~~six~~three months ended ~~June 30:~~March 31:
2021 2020 $ Change % Change
(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits $ 57,018 $ 58,750 $ (1,732) (3) %
Net occupancy 8,654 9,370 (716) (8)
Furniture and equipment 7,814 7,435 379 5
Data processing 6,244 5,063 1,181 23
Advertising and promotion 2,679 2,685 (6) —
Pennsylvania shares tax 2,090 1,992 98 5
Intangible amortization 1,729 1,853 (124) (7)
Other professional fees and services 1,842 1,818 24 1
FDIC insurance 1,134 761 373 49
Other operating 12,786 11,796 990 8
Subtotal 101,990 101,523 467 —
Loss on sale or write-down of assets 52 353 (301) (85)
COVID-19 related 306 442 (136) (31)
Branch consolidation 18 — 18 —
Litigation and operational losses 1,035 709 326 46
Total noninterest expense $ 103,401 $ 103,027 $ 374 — %


	2022		2021		$ Change		% Change
	(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits	$	30,932	$	28,671	$	2,261	8	%
Net occupancy	4,787		4,773		14		—
Furniture and equipment	3,730		3,948		(218)		(6)
Data processing	3,188		3,052		136		4
Advertising and promotion	1,226		1,324		(98)		(7)

Pennsylvania shares tax	1,005		832		173		21
Intangible amortization	862		866		(4)		—

Other professional fees and services	1,221		751		470		63
FDIC insurance	698		696		2		—

Other operating	7,285		6,344		941		15
Subtotal	54,934		51,257		3,677		7
Loss on sale or write-down of assets	75		9		66		733



COVID-19 related	17		74		(57)		(77)

Branch consolidation	98		40		58		145
Litigation and operational losses	600		479		121		25
Total noninterest expense	$	55,724	$	51,859	$	3,865	7	%

Noninterest expense increased ~~$0.4~~$3.9 million, or ~~0.4%~~7%, for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020.~~2021. Contributing to the increase in expense in ~~2021~~2022 is a ~~$1.2~~$2.3 million increase in data processing expense related to updates to our digital banking product offerings. Other operating expenses increased $1.0 million due to a $1.7 million credit in unfunded commitment expense recognized in 2020, with no similar credit in 2021. As a result of the adoption of CECL, the unfunded commitment expense is now recorded as part of provision for credit losses. FDIC insurance increased $0.4 million in comparison to the prior period as a result of a $0.6 million assessment credit received in 2020 due to the FDIC deposit insurance fund reaching the required minimum reserve ratio. There was no similar credit in 2021. Partially offsetting these increases is a $1.7 million decrease in salaries and employee benefits primarily due to ~~a decrease in full-time~~the number of full time equivalent employees increasing from ~~1,465~~1,387 at ~~June 30, 2020~~March 31, 2021 to ~~1,392~~1,432 at ~~June 30, 2021. Additionally, net occupancy expense decreased $0.7 million. These decreases are largely attributable~~March 31, 2022. Contributing to the ~~consolidation~~increase in other operating expenses were several expense categories, including credit reporting, travel and operational losses, none of ~~20% of the Bank’s branch facilities in the fourth quarter of 2020.~~which were individually significant.

Income Tax

The provision for income taxes ~~increased $11.2~~decreased $2.8 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the corresponding period in ~~2020.~~2021.

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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an annual effective tax rate of ~~19.9%~~19.5% and ~~17.5%~~19.4% for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

As of ~~June 30, 2021,~~March 31, 2022, our deferred tax assets totaled ~~$21.8~~$41.4 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.

~~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 June 30, 2021 Compared to Three Months Ended June 30, 2020~~

~~Net Income~~

For the three months ended June 30, 2021, First Commonwealth recognized net income of $29.6 million, or $0.31 diluted earnings per share, compared to net income of $23.9 million, or $0.24 diluted earnings per share, in the three months ended June 30, 2020. The increase in net income was primarily the result of a $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.

For the three months ended June 30, 2021, the Company’s return on average equity was 10.82% and its return on average assets was 1.26%, compared to 8.95% and 1.06%, respectively, for the three months ended June 30, 2020.

~~Net Interest Income~~

Net interest income, on a fully taxable equivalent basis, was $68.5 million in the second quarter of 2021, compared to $67.0 million for the same period in 2020. This increase was the result of $0.5 billion of growth in average interest-earning assets. However, the positive impact of this growth was more than offset by the impact of lower interest rates, which contributed to a 12 basis points decrease in the net interest margin. Net interest income comprises the majority of our operating revenue (i.e. net interest income before provision expense plus noninterest income), at 72.3% and 75.4% for the three months ended June 30, 2021 and 2020, respectively.

The net interest margin, on a fully taxable equivalent basis, was 3.17% and 3.29% for the three months ended June 30, 2021 and June 30, 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 3.35% for the three months ended June 30, 2021, a decrease of 35 basis points compared to the 3.70% yield for the same period in 2020. This is largely due to a decrease in the loan portfolio yield, which declined by 17 basis points when compared to the three months ended June 30, 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 5.1%. The yield on PPP loans includes the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $4.2 million. These loans increased the average balance of loans by $429.9 million for the second quarter of 2021, causing a 9 basis point increase in the yield on loans and a 10 basis point increase in the net interest margin. The yield on the investment portfolio decreased 50 basis points in comparison to the prior year.

The cost of interest-bearing liabilities decreased to 0.27% for the three months ended June 30, 2021, from 0.59% for the same period in 2020, primarily due to a decrease in the cost of interest-bearing deposits and short-term borrowings. Lower market interest rates resulted in the cost of interest-bearing demand deposits decreasing 3 basis points and short-term borrowings decreasing 8 basis points in comparison to the same period last year. The cost of long-term debt increased by 24 basis points due to the maturity of borrowings with lower interest rates.

For the three months ended June 30, 2021, changes in interest rates negatively impacted net interest income by $1.3 million when compared with the same period in 2020. The lower yield on interest-earning assets negatively impacted net interest income by $4.5 million, while the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $3.2 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $2.7 million in the three months ended June 30, 2021, as compared to the same period in 2020. Higher levels of interest-earning assets resulted in an increase of $1.5 million in interest income while changes in the volume and mix of interest-bearing liabilities decreased interest expense by $1.2 million. Average interest-earning assets for the three months ended June 30, 2021 increased $467.7 million, or 5.7%, compared to the same period in 2020. Average loans for the comparable period decreased $6.2 million, or 0.1%.

Net interest income also benefited from a $520.1 million increase in average net free funds at June 30, 2021 as compared to June 30, 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 $473.9 million, or 22.2%, in noninterest-bearing demand deposit average balances. Average time deposits for the three months ended June 30, 2021 decreased by $318.3 million compared to the comparable period in 2020, decreasing interest expense by $1.2 million.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

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

2021 2020
(dollars in thousands)
Interest income per Consolidated Statements of Income $ 72,051 $ 74,981
Adjustment to fully taxable equivalent basis 290 359
Interest income adjusted to fully taxable equivalent basis (non-GAAP) 72,341 75,340
Interest expense 3,852 8,295
Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 68,489 $ 67,045

~~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 June 30:~~

2021 2020
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 securities 29,385 195 2.66 44,171 338 3.08
Taxable investment securities 1,498,204 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 assets 8,657,906 72,341 3.35 8,190,158 75,340 3.70
Noninterest-earning assets:
Cash 93,627 94,223
Allowance for credit losses (102,303) (80,717)
Other assets 802,453 839,890
Total noninterest-earning assets 793,777 853,396
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 deposits 458,638 541 0.47 776,892 2,925 1.51
Short-term borrowings 114,966 27 0.09 112,063 47 0.17
Long-term debt 206,495 2,393 4.65 233,819 2,562 4.41
Total interest-bearing liabilities 5,638,630 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 liabilities 110,264 150,254
Shareholders’ equity 1,098,094 1,071,549
Total noninterest-bearing funding sources 3,813,053 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 June 30, 2021 and 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.~~

~~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 June 30, 2021 compared with June 30, 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 $ 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.

~~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 June 30:~~
2021 2020
Dollars Percentage Dollars Percentage
(dollars in thousands)
Commercial, financial, agricultural and other $ 3,449 82 % $ (1,350) (19) %
Time and demand 3,450 82
Commercial credit cards (1) —
Real estate construction 129 3 360 5
Residential real estate (56) (1) 1,517 22
Residential first lien 21 1
Residential junior lien/home equity (77) (2)
Commercial real estate (1,867) (45) 4,134 60
Multifamily 128 3
Nonowner occupied (972) (23)
Owner occupied (1,023) (25)
Loans to individuals 2,547 61 2,198 32
Automobile 2,404 57
Consumer credit cards (107) (2)
Consumer other 250 6
Provision for credit losses on loans $ 4,202 100 % $ 6,859 100 %
Provision for off-balance sheet credit exposure 1,211 —
Total provision for credit losses $ 5,413 $ 6,859

The provision for credit losses on loans for the three months ended June 30, 2021 decreased in comparison to the three months ended June 30, 2020 by $2.7 million. The level of provision expense in the second quarter of 2021 is primarily a result of a $3.6 million charge-off related to one commercial borrower and $1.2 million related to reserves for off-balance sheet commitments. Net charge-offs for the three months ended June 30, 2021 were $3.9 million.

The level of provision expense in the second quarter of 2020 was primarily due to a $5.6 million increase in 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.

~~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 June 30, 2021 and 2020 and the year-ended December 31, 2020:~~

6/30/2021 6/30/2020 12/31/2020
(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 other 3,887 1,285 6,318
Real estate construction — — —
Residential real estate 14 73 1,040
Commercial real estate 7 2,151 4,939
Loans to individuals 931 1,397 6,953
Total loans charged off 4,839 4,906 19,250
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other 103 51 314
Real estate construction 135 26 26
Residential real estate 174 71 414
Commercial real estate 1 — 312
Loans to individuals 499 265 991
Total recoveries 912 413 2,057
Net charge-offs 3,927 4,493 17,193
Provision for credit losses on loans charged to expense 4,202 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 June 30:~~
2021 2020 $ Change % Change
(dollars in thousands)
Noninterest Income:
Trust income $ 2,706 $ 2,109 $ 597 28 %
Service charges on deposit accounts 4,310 3,286 1,024 31
Insurance and retail brokerage commissions 1,978 1,831 147 8
Income from bank owned life insurance 1,509 1,800 (291) (16)
Card-related interchange income 7,406 5,886 1,520 26
Swap fee income 1,252 609 643 106
Other income 1,997 1,680 317 19
Subtotal 21,158 17,201 3,957 23
Net securities gains 10 8 2 25
Gain on sale of mortgage loans 3,084 4,243 (1,159) (27)
Gain on sale of other loans and assets 2,111 581 1,530 263
Derivatives mark to market (277) (221) (56) 25
Total noninterest income $ 26,086 $ 21,812 $ 4,274 20 %

Total noninterest income for the three months ended June 30, 2021 increased $4.3 million, or 20%, in comparison to the three months ended June 30, 2020. The most significant changes include a $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 $1.5 million and service charges on deposits increased $1.0 million due to growth in customer accounts and

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~transactions. 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 a lower level of sold mortgages.~~

~~Noninterest Expense~~

~~The following table presents the components of noninterest expense for the three months ended June 30:~~
2021 2020 $ Change % Change
(dollars in thousands)
Noninterest Expense:
Salaries and employee benefits $ 28,347 $ 28,773 $ (426) (1) %
Net occupancy 3,881 4,397 (516) (12)
Furniture and equipment 3,866 3,657 209 6
Data processing 3,192 2,596 596 23
Advertising and promotion 1,355 1,535 (180) (12)
Pennsylvania shares tax 1,258 1,254 4 —
Intangible amortization 863 919 (56) (6)
Other professional fees and services 1,091 920 171 19
FDIC insurance 438 733 (295) (40)
Other operating 6,442 7,094 (652) (9)
Subtotal 50,733 51,878 (1,145) (2)
Loss on sale or write-down of assets 43 140 (97) (69)
COVID-19 related 232 419 (187) (45)
Branch consolidation (22) — (22) —
Litigation and operational losses 556 319 237 74
Total noninterest expense $ 51,542 $ 52,756 $ (1,214) (2) %

Noninterest expense decreased $1.2 million, or 2%, for the three months ended June 30, 2021 compared to the same period in 2020. Net occupancy expense decreased $0.5 million and salary and employee benefit expense decreased $0.4 million. These decreases are largely attributable to the consolidation of 20% of the Bank’s branch facilities in the fourth quarter of 2020. Other operating expense decreased $0.7 million as a result of a $0.9 million decrease in unfunded commitment expense recognized in 2020. As a result of the adoption of CECL, the unfunded commitment expense is now recorded as part of provision for credit losses.

~~Income Tax~~

The provision for income taxes increased $2.7 million for the three months ended June 30, 2021, compared to the corresponding period in 2020. The effective tax rate increased 330 basis points from 17.4% to 20.7% due to a $8.4 million increase in income before income taxes.

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 ~~six~~three months of ~~2021,~~2022, the maturity and redemption of investment securities provided ~~$344.4~~$78.9 million in liquidity. These funds contributed to the liquidity used to originate loans and purchase investment securities and fund depositor withdrawals.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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.

~~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 ~~June 30, 2021,~~March 31, 2022, our maximum borrowing capacity under this program was $1.4 billion, and as of that date there was ~~$7.5~~$5.8 million outstanding with an average weighted rate of ~~0.37%~~0.55% and an average original term of ~~303~~341 days. These deposits are part of a reciprocal program ~~which~~that 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 ~~June 30, 2021,~~March 31, 2022, the borrowing capacity under this program totaled ~~$931.4 million~~$1.1 billion and there was no balance outstanding. As of ~~June 30, 2021,~~March 31, 2022, our maximum borrowing capacity at the FHLB of Pittsburgh was $1.8 billion and as of that date amounts used against this capacity included ~~$5.9~~$5.4 million in outstanding borrowings and no outstanding letters of credit.

We also have available unused federal funds lines with four correspondent banks. These lines have an aggregate commitment of $160.0 million with no outstanding balance as of ~~June 30, 2021.~~March 31, 2022. In addition, we have available unused repo lines with ~~three~~two correspondent banks. These lines have an aggregate commitment of ~~$620.3~~$400.0 million with no outstanding balance as of ~~June 30, 2021.~~March 31, 2022.

First Commonwealth Financial Corporation has an unsecured $20.0 million line of credit with another financial institution. As of ~~June 30, 2021,~~March 31, 2022, 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:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(dollars in thousands)					(dollars in thousands)
Noninterest-bearing demand deposits(a)	Noninterest-bearing demand deposits(a)	$	2,617,651	$	2,319,958	Noninterest-bearing demand deposits(a)	$	2,719,645	$	2,658,782
Interest-bearing demand deposits(a)	Interest-bearing demand deposits(a)	269,451		250,353		Interest-bearing demand deposits(a)	305,623		291,476
Savings deposits(a)	Savings deposits(a)	4,566,815		4,305,391		Savings deposits(a)	4,782,445		4,647,197
Time deposits	Time deposits	431,102		562,964		Time deposits	364,134		385,043
Total	Total	$	7,885,019	$	7,438,666	Total	$	8,171,847	$	7,982,498

(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 ~~six~~three months of ~~2021,~~2022, total deposits increased ~~$446.4~~$189.3 million. Interest-bearing demand and savings deposits increased ~~$280.5~~$149.4 million, noninterest-bearing demand deposits increased ~~$297.7~~$60.9 million and time deposits decreased ~~$131.9~~$20.9 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 ~~0.54~~0.81 and ~~0.51~~0.84 at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.

Gap analysis has limitations due to the static nature of the model that holds volumes and consumer behaviors constant in all economic and interest rate scenarios. A lower level of rate sensitive assets to rate sensitive liabilities repricing in one year could indicate reduced net interest income in a rising interest rate scenario, and conversely, increased net interest income in a declining interest rate scenario. However, the gap analysis incorporates only the level of interest-earning assets and ~~interest-bearing~~interest-

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

bearing liabilities and not the sensitivity each has to changes in interest rates. The impact of the sensitivity to changes in interest rates is provided in the table below the gap analysis.

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

~~FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES~~

The following is the gap analysis as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		June 30, 2021																			March 31, 2022
		0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years				0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
		(dollars in thousands)																			(dollars in thousands)
Loans		$	609,441		$	605,333		$	1,039,491		$	2,254,265		$	3,583,352		$	838,620
Loans and leases																				Loans and leases	$	2,992,947		$	299,339		$	558,586		$	3,850,872		$	2,210,550		$	812,022
Investments	Investments	107,866			108,841			185,831			402,538			767,692			427,536			Investments	60,056			43,525			86,785			190,366			550,110			758,722
Other interest-earning assets	Other interest-earning assets	194,948			—			—			194,948			—			—			Other interest-earning assets	404,516			—			—			404,516			—			—
Total interest-sensitive assets (ISA)	Total interest-sensitive assets (ISA)	912,255			714,174			1,225,322			2,851,751			4,351,044			1,266,156			Total interest-sensitive assets (ISA)	3,457,519			342,864			645,371			4,445,754			2,760,660			1,570,744
Certificates of deposit	Certificates of deposit	107,630			77,552			119,690			304,872			124,303			1,854			Certificates of deposit	96,518			69,072			93,274			258,864			104,226			1,194
Other deposits	Other deposits	4,836,266			—			—			4,836,266			—			—			Other deposits	5,088,068			—			—			5,088,068			—			—
Borrowings	Borrowings	179,737			198			396			180,331			3,167			101,959			Borrowings	168,116			201			401			168,718			53,211			51,383
Total interest-sensitive liabilities (ISL)	Total interest-sensitive liabilities (ISL)	5,123,633			77,750			120,086			5,321,469			127,470			103,813			Total interest-sensitive liabilities (ISL)	5,352,702			69,273			93,675			5,515,650			157,437			52,577
Gap	Gap	$	(4,211,378)		$	636,424		$	1,105,236		$	(2,469,718)		$	4,223,574		$	1,162,343		Gap	$	(1,895,183)		$	273,591		$	551,696		$	(1,069,896)		$	2,603,223		$	1,518,167
ISA/ISL	ISA/ISL	0.18			9.19			10.20			0.54			34.13			12.20			ISA/ISL	0.65			4.95			6.89			0.81			17.54			29.88
Gap/Total assets	Gap/Total assets	44.79		%	6.77		%	11.75		%	26.27		%	44.92		%	12.36		%	Gap/Total assets	19.66		%	2.84		%	5.72		%	11.10		%	27.00		%	15.75		%


		December 31, 2020																			December 31, 2021
		0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years				0-90 Days			91-180 Days			181-365 Days			Cumulative 0-365 Days			Over 1 Year Through 5 Years			Over 5 Years
		(dollars in thousands)																			(dollars in thousands)
Loans	Loans	$	596,292		$	495,759		$	942,174		$	2,034,225		$	3,424,936		$	1,270,694		Loans	$	2,910,172		$	394,048		$	606,468		$	3,910,688		$	2,296,873		$	555,022
Investments	Investments	109,706			82,052			158,357			350,115			495,013			150,976			Investments	98,969			82,267			154,316			335,552			725,576			516,766
Other interest-earning assets	Other interest-earning assets	256,572			—			—			256,572			—			—			Other interest-earning assets	310,629			—			—			310,629			—			—
Total interest-sensitive assets (ISA)	Total interest-sensitive assets (ISA)	962,570			577,811			1,100,531			2,640,912			3,919,949			1,421,670			Total interest-sensitive assets (ISA)	3,319,770			476,315			760,784			4,556,869			3,022,449			1,071,788
Certificates of deposit	Certificates of deposit	163,340			120,458			135,285			419,083			141,577			2,153			Certificates of deposit	97,269			72,453			106,243			275,965			107,795			1,232
Other deposits	Other deposits	4,555,744			—			—			4,555,744			—			—			Other deposits	4,938,673			—			—			4,938,673			—			—
Borrowings	Borrowings	189,645			50,105			209			239,959			1,673			104,166			Borrowings	210,682			200			400			211,282			53,197			51,577
Total interest-sensitive liabilities (ISL)	Total interest-sensitive liabilities (ISL)	4,908,729			170,563			135,494			5,214,786			143,250			106,319			Total interest-sensitive liabilities (ISL)	5,246,624			72,653			106,643			5,425,920			160,992			52,809
Gap	Gap	$	(3,946,159)		$	407,248		$	965,037		$	(2,573,874)		$	3,776,699		$	1,315,351		Gap	$	(1,926,854)		$	403,662		$	654,141		$	(869,051)		$	2,861,457		$	1,018,979
ISA/ISL	ISA/ISL	0.20			3.39			8.12			0.51			27.36			13.37			ISA/ISL	0.63			6.56			7.13			0.84			18.77			20.30
Gap/Total assets	Gap/Total assets	43.52		%	4.49		%	10.64		%	28.38		%	41.65		%	14.51		%	Gap/Total assets	20.19		%	4.23		%	6.85		%	9.10		%	29.98		%	10.68		%

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 %


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
March 31, 2022 ($)	$	(8,703)		$	(4,632)		$	5,772		$	9,861
March 31, 2022 (%)	(2.97)		%	(1.58)		%	1.97		%	3.36		%

December 31, 2021 ($)	$	(9,008)		$	(4,976)		$	5,956		$	10,224
December 31, 2021 (%)	(3.25)		%	(1.79)		%	2.15		%	3.69		%

7059

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.
Net interest income change (12 months) for basis point movements of:
-200 -100 +100 +200
(dollars in thousands)
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 %


	Net interest income change (12 months) for basis point movements of:
	-200			-100			+100			+200
	(dollars in thousands)
March 31, 2022 ($)	$	(26,610)		$	(13,796)		$	14,056		$	29,773
March 31, 2022 (%)	(9.07)		%	(4.70)		%	4.79		%	10.15		%

December 31, 2021 ($)	$	(26,120)		$	(17,640)		$	13,867		$	29,192
December 31, 2021 (%)	(9.42)		%	(6.36)		%	5.00		%	10.53		%

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 ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the cost of our interest-bearing liabilities averaged ~~0.31%~~0.22% and ~~0.72%~~0.34%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged ~~3.49%~~3.33% and ~~3.97%~~3.63%, respectively.

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

Credit Risk

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

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

First Commonwealth also maintains a reserve for unfunded loan commitments and letters of credit based upon credit risk and probability of funding. The reserve totaled ~~$5.5~~$8.6 million at ~~June 30, 2021~~March 31, 2022 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

Nonperforming loans include nonaccrual loans and loans classified as troubled debt restructurings. Nonaccrual loans represent loans on which interest accruals have been discontinued. Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower, who could not obtain comparable terms from alternative financing sources. In the first ~~six~~three months of ~~2021, fourteen~~2022, two loans totaling ~~$13.4~~$0.1 million were identified as troubled debt restructurings.

The balance of troubled debt restructured loans ~~increased $7.3~~decreased $3.3 million from December 31, ~~2020.~~2021. Changes during the first ~~six~~three months of ~~2021~~2022 can be attributed to ~~new restructurings in conjunction with bankruptcy, including two commercial relationships totaling $13.0 million, offset by payments received on existing~~the pay off and paydown of troubled debt ~~restructured loans, including the payoff of $1.7 million of two commercial loan relationships and the pay down of one commercial relationship of $2.7 million.~~loans. Please refer to Note 7 “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 troubled debt restructuring. As of June 30, 2021, loan customers with an aggregate principal balance of $59.5 million were still in 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.

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

~~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.

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

Nonperforming loans, including loans held for sale, decreased ~~$1.3~~$17.7 million to ~~$52.8~~$37.5 million at ~~June 30, 2021~~March 31, 2022 compared to ~~$54.1~~$55.2 million at December 31, ~~2020.~~2021. During the ~~six~~three months ended ~~June 30, 2021, $15.4~~March 31, 2022, a $14.5 million commercial real estate loan was removed from nonaccrual status and subsequent to March 31, 2022 the loan was paid off in full. During the same period $0.7 million of loans were moved to nonaccrual, including the transfer of one commercial real estate relationships totaling $6.3 million and a $3.9 million commercial, financial, industrial loan to one borrower. Offsetting these additions was a sale 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 $1.4 million charge-off of a commercial real estate relationship. Subsequent to June 30, 2021, a $6.7 million payoff on a commercial real estate nonaccrual loan was received from the borrower.nonaccrual.

The allowance for credit losses as a percentage of nonperforming loans was ~~183.81%~~243.38% as of ~~June 30, 2021,~~March 31, 2022, compared to ~~187.43%~~167.67% at December 31, ~~2020,~~2021, and ~~145.37%~~192.06% at ~~June 30, 2020.~~March 31, 2021. 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 ~~$2.9~~$0.4 million and general reserves of ~~$94.1~~$90.8 million as of ~~June 30, 2021.~~March 31, 2022. Specific reserves decreased ~~$2.0 million~~$44 thousand from December 31, ~~2020,~~2021, and ~~$3.9~~$2.8 million from ~~June 30, 2020.~~March 31, 2021. The decrease from both periods is primarily due to the charge-off and payoffs of relationships with specific reserves assigned. Management believes that the allowance for credit losses is at a level deemed sufficient to absorb losses inherent in the loan portfolio at ~~June 30, 2021.~~March 31, 2022.

Criticized loans totaled ~~$250.4~~$174.1 million at ~~June 30, 2021~~March 31, 2022 and represented ~~3.7%~~3% of the loan portfolio. The level of criticized loans decreased as of ~~June 30, 2021~~March 31, 2022 when compared to December 31, ~~2020,~~2021, by ~~$52.4~~$24.1 million, or ~~17.3%~~12%. Classified loans totaled ~~$56.0~~$75.3 million at ~~June 30, 2021~~March 31, 2022 compared to ~~$76.2~~$77.6 million at December 31, ~~2020,~~2021, a decrease of ~~$20.2~~$2.3 million, or ~~27%~~3%. The decrease in criticized loans is the result of the aforementioned changes in nonperforming loans as well as credit upgrades on borrowers primarily in the hospitality sector. Delinquency on accruing loans for the same period increased ~~$5.4~~$14.1 million, or ~~44%~~134%, as a result of the ~~majority of which are residential~~commercial real estate loan that was moved out of a nonaccrual status being 30 days delinquent at March 31, 2022. At March 31, 2022, this loan was well secured and ~~consumer loans.~~in the process of collection and subsequent to March 31, 2022, this loan paid off in full.

The allowance for credit losses was ~~$97.0~~$91.2 million at ~~June 30, 2021,~~March 31, 2022, or ~~1.44%~~1.31% of total loans outstanding, compared to ~~1.50%~~1.35% reported at December 31, ~~2020,~~2021, and ~~1.18%~~1.44% at ~~June 30, 2020.~~March 31, 2021. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were ~~1.41%~~1.31% at ~~June 30, 2021~~March 31, 2022 compared to ~~1.43%~~1.36% at December 31, ~~2020~~2021 and ~~1.09%~~1.40% at ~~June 30, 2020.~~March 31, 2021. The decrease in the general reserve from December 31, ~~2020 is~~2021 and March 31, 2021 are reflective of lower 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.~~March 31, 2022.

7261

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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


		June 30,								December 31, 2020					March 31,								December 31, 2021
		2021				2020									2022				2021
		(dollars in thousands)													(dollars in thousands)
Nonperforming Loans:	Nonperforming Loans:													Nonperforming Loans:
Loans on nonaccrual basis	Loans on nonaccrual basis	$	22,219			$	44,968			$	30,801			Loans on nonaccrual basis	$	20,490			$	23,056				$	34,926

Troubled debt restructured loans on nonaccrual basis	Troubled debt restructured loans on nonaccrual basis	23,981				3,600				14,740				Troubled debt restructured loans on nonaccrual basis	10,090				20,628					13,134
Troubled debt restructured loans on accrual basis	Troubled debt restructured loans on accrual basis	6,593				7,455				8,512				Troubled debt restructured loans on accrual basis	6,887				6,697					7,120
Total nonperforming loans	Total nonperforming loans	$	52,793			$	56,023			$	54,053			Total nonperforming loans	$	37,467			$	50,381				$	55,180
Loans past due 30 to 90 days and still accruing	Loans past due 30 to 90 days and still accruing	$	5,895			$	6,077			$	10,638			Loans past due 30 to 90 days and still accruing	$	22,692			$	6,837				$	8,911
Loans past due in excess of 90 days and still accruing	Loans past due in excess of 90 days and still accruing	$	903			$	1,421			$	1,523			Loans past due in excess of 90 days and still accruing	$	1,921			$	1,079				$	1,606
Other real estate owned	Other real estate owned	$	394			$	1,634			$	1,215			Other real estate owned	$	667			$	916				$	642
Loans held for sale at end of period	Loans held for sale at end of period	$	19,530			$	30,409			$	33,436			Loans held for sale at end of period	$	10,506			$	20,604				$	18,583
Portfolio loans outstanding at end of period		$	6,740,535			$	6,922,075			$	6,761,183
Average loans outstanding		$	6,776,560		(a)	$	6,516,854		(a)	$	6,737,339		(b)
Nonperforming loans as a percentage of total loans		0.78		%		0.81		%		0.80		%
Provision for credit losses		$	2,926		(a)	$	37,826		(a)	$	53,472		(b)
Portfolio loans and leases outstanding at end of period														Portfolio loans and leases outstanding at end of period	$	6,952,112			$	6,736,894				$	6,839,230
Average loans and leases outstanding														Average loans and leases outstanding	$	6,893,628		(a)	$	6,781,451		(a)		$	6,777,192		(b)
Nonperforming loans as a percentage of total loans and leases														Nonperforming loans as a percentage of total loans and leases	0.54		%		0.75		%			0.81		%
Provision for credit losses on loans and leases														Provision for credit losses on loans and leases	$	(200)		(a)	$	(1,276)		(a)		$	(377)		(b)
Allowance for credit losses	Allowance for credit losses	$	97,038			$	81,441			$	101,309			Allowance for credit losses	$	91,188			$	96,763				$	92,522
Net charge-offs	Net charge-offs	$	7,197		(a)	$	8,022		(a)	$	17,193		(b)	Net charge-offs	$	1,134		(a)	$	3,270		(a)		$	8,410		(b)
Net charge-offs as a percentage of average loans outstanding (annualized)		0.21		%		0.25		%		0.26		%
Net charge-offs as a percentage of average loans and leases outstanding (annualized)														Net charge-offs as a percentage of average loans and leases outstanding (annualized)	0.07		%		0.20		%			0.12		%
Provision for credit losses as a percentage of net charge-offs	Provision for credit losses as a percentage of net charge-offs	40.66		%	(a)	471.53		%	(a)	311.01		%	(b)	Provision for credit losses as a percentage of net charge-offs	(17.64)		%	(a)	(39.02)		%	(a)		(4.48)		%	(b)
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)		1.50		%		1.28		%		1.61		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)														Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)	1.31		%		1.44		%			1.35		%
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans (c)														Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans (c)	1.32		%		1.55		%			1.37		%

Allowance for credit losses as a percentage of nonperforming loans (d)	Allowance for credit losses as a percentage of nonperforming loans (d)	183.81		%		145.37		%		187.43		%		Allowance for credit losses as a percentage of nonperforming loans (d)	243.38		%		192.06		%			167.67		%

(a)For the ~~six-month~~three-month period ended.

(b)For the twelve-month period ended.

(c)Does not include loans held for sale.

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

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


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amount		%		Amount		%			Amount		%		Amount		%
		(dollars in thousands)									(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	1,374,177	20	%	$	1,555,986	23	%	Commercial, financial, agricultural and other	$	1,123,690	16	%	$	1,173,452	17	%
Real estate construction	Real estate construction	414,816		6		427,221		6		Real estate construction	398,988		6		494,456		7
Residential real estate	Residential real estate	1,828,783		27		1,750,592		26		Residential real estate	2,006,221		29		1,920,250		28
Commercial real estate	Commercial real estate	2,205,758		33		2,211,569		33		Commercial real estate	2,344,281		34		2,251,097		33
Loans to individuals	Loans to individuals	917,001		14		815,815		12		Loans to individuals	1,078,932		15		999,975		15
Total loans and leases net of unearned income		$	6,740,535	100	%	$	6,761,183	100	%
Total loans and leases, net of unearned income										Total loans and leases, net of unearned income	$	6,952,112	100	%	$	6,839,230	100	%

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, loans ~~decreased $20.6~~increased $112.9 million, or ~~0.3%~~1.7%, compared to balances outstanding at December 31, ~~2020.~~2021.

Commercial, financial, agricultural and other loans decreased ~~$181.8~~$49.8 million as the result of a $42.4 million decline in PPP loans.

Real estate construction loans decreased $95.5 million, or 19.3%, primarily due to the ~~payoff~~completion of ~~$186.5~~commercial real estate construction projects. Residential real estate grew $86.0 million, ~~in PPP loans.~~or 4.5%, primarily due to originations of closed-end 1-4

7362

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~~increased $93.2 million, or ~~0.3%~~4.1%, primarily due to ~~payoffs~~growth in multifamily and ~~less new loan volume.~~nonresidential property due in part to the completion of several construction projects. Loans to individuals increased ~~$101.2~~$79.0 million, or ~~12.4%~~7.9%, ~~as a result of~~primarily due to 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.~~portfolio.

As indicated in the table below, commercial real estate, ~~and~~ residential real estate and commercial, financial and agricultural and other loans represent a significant portion of the nonperforming loans as of ~~June 30, 2021.~~March 31, 2022. See discussions related to the provision for credit losses and loans for more information.


		For the Six Months Ended June 30, 2021						As of June 30, 2021							For the Three Months Ended March 31, 2022						As of March 31, 2022
		Net Charge- offs		% of Total Net Charge-offs		Net Charge- offs as a % of Average Loans (annualized)		Nonperforming Loans		% of Total Nonperforming Loans		Nonperforming Loans as a % of Total Loans			Net Charge- offs		% of Total Net Charge-offs		Net Charge- offs as a % of Average Loans (annualized)		Nonperforming Loans		% of Total Nonperforming Loans		Nonperforming Loans as a % of Total Loans
		(dollars in thousands)													(dollars in thousands)
Commercial, financial, agricultural and other	Commercial, financial, agricultural and other	$	4,263	59.23	%	0.13	%	$	14,335	27.15	%	0.21	%	Commercial, financial, agricultural and other	$	395	34.83	%	0.02	%	$	4,049	10.81	%	0.06	%
Real estate construction	Real estate construction	(135)		(1.87)		(0.01)		54		0.10		—		Real estate construction	—		—		—		—		—		—
Residential real estate	Residential real estate	(92)		(1.28)		—		10,029		19.00		0.15		Residential real estate	110		9.70		0.01		9,161		24.45		0.13
Commercial real estate	Commercial real estate	1,517		21.08		0.04		27,899		52.85		0.41		Commercial real estate	(14)		(1.23)		—		23,834		63.61		0.34
Loans to individuals	Loans to individuals	1,644		22.84		0.05		476		0.90		0.01		Loans to individuals	643		56.70		0.04		423		1.13		0.01
Total loans, net of unearned income		$	7,197	100.00	%	0.21	%	$	52,793	100.00	%	0.78	%
Total loans and leases, net of unearned income														Total loans and leases, net of unearned income	$	1,134	100.00	%	0.07	%	$	37,467	100.00	%	0.54	%

Net charge-offs for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 totaled ~~$7.2~~$1.1 million, compared to ~~$8.0~~$3.3 million for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. The most significant charge-offs during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 included ~~a $3.6~~$0.6 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 ~~June 30, 2021,~~March 31, 2022, shareholders’ equity was $1.1 billion, ~~an increase~~a decrease of ~~$37.8~~$41.8 million from December 31, ~~2020.~~2021. The ~~increase~~decrease was ~~primarily~~ the result of ~~$69.4~~a $59.4 million ~~in net income, $2.8 million in treasury stock sales and an increase of $10.1 million~~decline in the fair value of available for sale ~~investments.~~investments and interest rate swaps which are reflected in the Other Comprehensive Income component of capital. Other items impacting capital include increases of $27.7 million in net income and $2.2 million in treasury stock sales. These increases were partially offset by ~~$21.6~~$10.8 million of dividends paid to shareholders and ~~$2.7~~$1.5 million of common stock repurchases. Cash dividends declared per common share were ~~$0.225~~$0.115 for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~$0.22~~$0.11 for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

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

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

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

~~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 ~~June 30, 2021,~~March 31, 2022, the Company had ~~$292.4~~$28.9 million in PPP loans outstanding under the CARES Act. Because these loans are 100% guaranteed by the SBA, banking regulators confirmed that they have a zero percent risk weight under applicable risk-based capital rules. Additionally, a bank may exclude all PPP loans pledged as collateral to the Federal Reserve's PPP Facility from average total assets when calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility will be included. The PPP loans originated by the Company are included in our leverage ratio as of ~~June 30, 2021,~~March 31, 2022, as we did not utilize the PPP Facility.

As of ~~June 30, 2021,~~March 31, 2022, 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:


		Actual				Minimum Capital Required			Required to be Considered Well Capitalized					Actual								Minimum Capital Required	Required to be Considered Well Capitalized
		Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount			Ratio			Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
		(dollars in thousands)									(dollars in thousands)
Total Capital to Risk Weighted Assets	Total Capital to Risk Weighted Assets																Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	1,055,710	15.16	%		$	730,988	10.50	%		$	696,179		10.00	%	First Commonwealth Financial Corporation	$	1,092,245	14.74	%		$	777,861	10.50	%	$	740,820	10.00	%
First Commonwealth Bank	First Commonwealth Bank	1,008,415		14.52			729,387		10.50			694,654			10.00		First Commonwealth Bank	1,034,163		13.99			776,378		10.50		739,407		10.00
Tier I Capital to Risk Weighted Assets	Tier I Capital to Risk Weighted Assets																Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	876,014	12.58	%		$	591,752	8.50	%		$	556,943		8.00	%	First Commonwealth Financial Corporation	$	907,130	12.24	%		$	629,697	8.50	%	$	592,656	8.00	%
First Commonwealth Bank	First Commonwealth Bank	828,719		11.93			590,456		8.50			555,723			8.00		First Commonwealth Bank	849,048		11.48			628,496		8.50		591,526		8.00
Tier I Capital to Average Assets	Tier I Capital to Average Assets																Tier I Capital to Average Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	876,014	9.58	%		$	365,819	4.00	%		$	457,273		5.00	%	First Commonwealth Financial Corporation	$	907,130	9.81	%		$	369,827	4.00	%	$	462,283	5.00	%
First Commonwealth Bank	First Commonwealth Bank	828,719		9.08			365,012		4.00			456,265			5.00		First Commonwealth Bank	849,048		9.20			369,148		4.00		461,435		5.00
Common Equity Tier I to Risk Weighted Assets	Common Equity Tier I to Risk Weighted Assets																Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	First Commonwealth Financial Corporation	$	806,014	11.58	%		$	487,325	7.00	%		$	452,516		6.50	%	First Commonwealth Financial Corporation	$	837,130	11.30	%		$	518,574	7.00	%	$	481,533	6.50	%
First Commonwealth Bank	First Commonwealth Bank	828,719		11.93			486,258		7.00			451,525			6.50		First Commonwealth Bank	849,048		11.48			517,585		7.00		480,615		6.50

On ~~July 27, 2021,~~April 26, 2022, First Commonwealth Financial Corporation declared a quarterly dividend of ~~$0.115~~$0.12 per share payable on ~~August~~May 20, ~~2021~~2022 to shareholders of record as of ~~August~~May 6, ~~2021.~~2022. The timing and amount of future dividends are at the discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.

In ~~January~~November 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 ~~June 30, 2021, 100,736~~March 31, 2022, 937,670 common shares had been repurchased under this program at an average price of ~~$13.96~~$15.39 per share.

New Accounting Pronouncements

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

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

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

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

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

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 cross-functional working group to manage the Company’s transition from LIBOR.

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

alternative reference ~~rates.~~rates and the use of LIBOR has been discontinued as an index for new loans. The Company continues to evaluate the impact of the LIBOR transition and adopting the new standard.

7564

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

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

Table of Contents

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

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

ITEM 4. Controls and Procedures

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

7666

Table of Contents

PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 1. LEGAL PROCEEDINGS

The information required by this item is set forth in Part I, Item 1, Note 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, ~~2020.~~2021.

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

On 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 second quarter of 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*
April 30, 2021 54,311 13.95 54,311 1,645,997
May 31, 2021 — — — 1,574,290
June 30, 2021 18,413 13.95 18,413 1,676,878
Total 72,724 $ 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.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

7767

Table of Contents

PART II – OTHER INFORMATION

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 6. EXHIBITS

Exhibit
Number

Description

Incorporated by Reference to

10.1

2022 Annual Incentive Plan

Filed herewith

10.2

2022-2024 Long-Term Incentive Plan

Filed herewith

31.1

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

Filed herewith

31.2

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

Filed herewith

32.1

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

Filed herewith

32.2

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

Filed herewith

101

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

Filed herewith

7868

Table of Contents

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: ~~August 6, 2021~~May 9, 2022						/s/ T. Michael Price
						T. Michael Price President and Chief Executive Officer

DATED: ~~August 6, 2021~~May 9, 2022						/s/ James R. Reske
						James R. Reske Executive Vice President, Chief Financial Officer and Treasurer

7969


	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
	(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	(1,771)		0		(559)		(2,415)		(3,809)		(8,554)
Recoveries	117		26		121		44		476		784
Provision (credit)	6,245		483		5,586		15,770		7,683		35,767
Ending balance	24,812		3,067		9,239		33,130		9,334		79,582
Acquired loans:
Beginning balance	13		0		2		37		0		52
Charge-offs	0		0		(91)		(2)		(207)		(300)
Recoveries	15		0		25		0		8		48
Provision (credit)	304		171		64		1,321		199		2,059
Ending balance	332		171		0		1,356		0		1,859
Total ending balance	$	25,144	$	3,238	$	9,239	$	34,486	$	9,334	$	81,441
Ending balance: individually evaluated for impairment	$	958	$	171	$	0	$	5,766	$	0	$	6,895
Ending balance: collectively evaluated for impairment	24,186		3,067		9,239		28,720		9,334		74,546
Loans:
Ending balance	1,773,099		416,329		1,723,288		2,224,710		784,649		6,922,075
Ending balance: individually evaluated for impairment	3,336		308		1,498		32,537		0		37,679
Ending balance: collectively evaluated for impairment	1,769,763		416,021		1,721,790		2,192,173		784,649		6,884,396


	6/30/2021		6/30/2020		12/31/2020
	(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 other	3,887		1,285		6,318
Real estate construction	—		—		—
Residential real estate	14		73		1,040
Commercial real estate	7		2,151		4,939
Loans to individuals	931		1,397		6,953
Total loans charged off	4,839		4,906		19,250
Recoveries of loans previously charged off:
Commercial, financial, agricultural and other	103		51		314
Real estate construction	135		26		26
Residential real estate	174		71		414
Commercial real estate	1		—		312
Loans to individuals	499		265		991
Total recoveries	912		413		2,057
Net charge-offs	3,927		4,493		17,193
Provision for credit losses on loans charged to expense	4,202		6,859		53,472
Balance, end of period	$	97,038	$	81,441	$	101,309


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, 2021	54,311	13.95		54,311	1,645,997
May 31, 2021	—	—		—	1,574,290
June 30, 2021	18,413	13.95		18,413	1,676,878

Total	72,724	$	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.