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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File Number 001-11138
First Commonwealth Financial Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania25-1428528
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
601 Philadelphia Street
IndianaPA15701
(Address of principal executive offices)(Zip Code)
724-349-7220
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par valueFCFNew 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 8, 2022,7, 2023, was 93,378,820.102,406,215.

Table of Contents


FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
PART I.
ITEM 1.
Consolidated Statements of Financial Condition (Unaudited)
3
Consolidated Statements of Income (Unaudited)
4
Consolidated Statements of Comprehensive Income (Unaudited)
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.
53
ITEM 3.
79
ITEM 4.
79
PART II.
ITEM 1.
80
ITEM 1A.
80
ITEM 2.
80
ITEM 3.
80
ITEM 4.
80
ITEM 5.
80
ITEM 6.
81
82

2
Table of Contents



ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
June 30, 2022December 31, 2021
 (dollars in thousands, except share data)
Assets
Cash and due from banks$120,267 $84,738 
Interest-bearing bank deposits179,533 310,634 
Securities available for sale, at fair value863,622 1,041,380 
Securities held to maturity, at amortized cost (Fair value of $437,880 and $536,651 at June 30, 2022 and December 31, 2021, respectively)492,229 541,311 
Other investments13,665 12,838 
Loans held for sale12,876 18,583 
Loans and leases:
Portfolio loans and leases7,119,754 6,839,230 
Allowance for credit losses(93,603)(92,522)
Net loans and leases7,026,151 6,746,708 
Premises and equipment, net121,872 120,775 
Other real estate owned93 642 
Goodwill303,328 303,328 
Amortizing intangibles, net10,121 11,188 
Bank owned life insurance224,534 224,700 
Other assets158,136 128,268 
Total assets$9,526,427 $9,545,093 
Liabilities
Deposits (all domestic):
Noninterest-bearing$2,726,242 $2,658,782 
Interest-bearing5,327,303 5,323,716 
Total deposits8,053,545 7,982,498 
Short-term borrowings88,923 138,315 
Subordinated debentures170,856 170,775 
Other long-term debt5,221 5,573 
Capital lease obligation5,675 5,921 
Total long-term debt181,752 182,269 
Other liabilities153,049 132,639 
Total liabilities8,477,269 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 June 30, 2022 and December 31, 2021, and 93,705,120 and 94,233,152 shares outstanding at June 30, 2022 and December 31, 2021, respectively113,915 113,915 
Additional paid-in capital497,431 496,121 
Retained earnings727,573 691,260 
Accumulated other comprehensive loss, net(97,025)(8,768)
Treasury stock (20,209,782 and 19,681,750 shares at June 30, 2022 and December 31, 2021, respectively)(192,736)(183,156)
Total shareholders’ equity1,049,158 1,109,372 
Total liabilities and shareholders’ equity$9,526,427 $9,545,093 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Table of Contents


ITEM 1. Financial Statements and Supplementary Data (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2022202120222021
(dollars in thousands, except share data)
Interest Income
Interest and fees on loans and leases$69,515 $65,367 $133,909 $133,680 
Interest and dividends on investments:
Taxable interest6,286 6,302 12,764 11,666 
Interest exempt from federal income taxes120 154 246 318 
Dividends149 138 284 281 
Interest on bank deposits658 90 769 167 
Total interest income76,728 72,051 147,972 146,112 
Interest Expense
Interest on deposits797 1,433 1,610 3,485 
Interest on short-term borrowings18 27 39 58 
Interest on subordinated debentures2,143 2,136 4,272 4,264 
Interest on other long-term debt51 194 103 540 
Interest on lease obligations57 62 114 124 
Total interest expense3,066 3,852 6,138 8,471 
Net Interest Income73,662 68,199 141,834 137,641 
Provision for credit losses4,099 5,413 6,063 1,023 
Net Interest Income after Provision for Credit Losses69,563 62,786 135,771 136,618 
Noninterest Income
Net securities gains— 10 2 16 
Trust income2,573 2,706 5,286 5,222 
Service charges on deposit accounts4,886 4,310 9,501 8,357 
Insurance and retail brokerage commissions2,486 1,978 4,758 4,150 
Income from bank owned life insurance1,383 1,509 2,891 3,460 
Gain on sale of mortgage loans1,561 3,084 2,843 8,130 
Gain on sale of other loans and assets1,099 2,111 3,418 3,801 
Card-related interchange income7,137 7,406 13,627 13,833 
Derivatives mark to market42 (277)389 1,153 
Swap fee income1,154 1,252 1,607 1,398 
Other income2,188 1,997 4,163 3,921 
Total noninterest income24,509 26,086 48,485 53,441 
Noninterest Expense
Salaries and employee benefits30,949 28,347 61,881 57,018 
Net occupancy4,170 3,881 8,957 8,654 
Furniture and equipment3,857 3,866 7,587 7,814 
Data processing3,470 3,192 6,658 6,244 
Advertising and promotion1,434 1,355 2,660 2,679 
Pennsylvania shares tax913 1,258 1,918 2,090 
Intangible amortization862 863 1,724 1,729 
Other professional fees and services1,197 1,091 2,418 1,842 
FDIC insurance702 438 1,400 1,134 
Loss on sale or write-down of assets86 43 161 52 
Litigation and operational losses629 556 1,229 1,035 
COVID-19 related62 232 79 306 
Branch consolidation(202)(22)(104)18 
Other operating7,550 6,442 14,835 12,786 
Total noninterest expense55,679 51,542 111,403 103,401 
Income Before Income Taxes38,393 37,330 72,853 86,658 
Income tax provision7,639 7,711 14,373 17,269 
Net Income$30,754 $29,619 $58,480 $69,389 
Average Shares Outstanding94,020,240 96,012,828 94,049,308 96,019,808 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Table of Contents


Average Shares Outstanding Assuming Dilution94,245,770 96,282,425 94,273,808 96,255,475 
Per Share Data: Basic Earnings per Share
$0.33 $0.31 $0.62 $0.72 
 Diluted Earnings per Share$0.33 $0.31 $0.62 $0.72 
Cash Dividends Declared per Common Share$0.120 $0.115 $0.235 $0.225 

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


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2022202120222021
 (dollars in thousands)
Net Income$30,754 $29,619 $58,480 $69,389 
Other comprehensive (loss) income, before tax benefit (expense):
Unrealized holding (losses) gains on securities arising during the period(31,794)1,707 (89,045)(14,097)
Less: reclassification adjustment for gains on securities included in net income— (10)(2)(16)
Unrealized holding (losses) gains on derivatives arising during the period(4,745)(537)(22,671)1,305 
Total other comprehensive (loss) income, before tax benefit (expense)(36,539)1,160 (111,718)(12,808)
Income tax benefit (expense) related to items of other comprehensive (loss) income7,674 (243)23,461 2,690 
Total other comprehensive (loss) income(28,865)917 (88,257)(10,118)
Comprehensive Income (Loss)$1,889 $30,536 $(29,777)$59,271 

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


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
 (dollars in thousands, except share and per share data)
Balance at December 31, 202194,233,152 $113,915 $496,121 $691,260 $(8,768)$(183,156)$1,109,372 
Net income58,480 58,480 
Other comprehensive loss(88,257)(88,257)
Cash dividends declared ($0.235 per share)(22,167)(22,167)
Treasury stock acquired(805,921)(11,145)(11,145)
Treasury stock reissued174,989 580 — 1,612 2,192 
Restricted stock102,900 — 730 — (47)683 
Balance at June 30, 202293,705,120 $113,915 $497,431 $727,573 $(97,025)$(192,736)$1,049,158 
 Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
 (dollars in thousands, except share and per share data)
Balance at December 31, 202096,130,751 $113,915 $494,683 $596,614 $17,233 $(153,828)$1,068,617 
Net income69,389 69,389 
Other comprehensive loss(10,118)(10,118)
Cash dividends declared ($0.225 per share)(21,641)(21,641)
Treasury stock acquired(196,119)(2,658)(2,658)
Treasury stock reissued173,907 771 — 1,493 2,264 
Restricted stock93,089 — 445 — 121 566 
Balance at June 30, 202196,201,628 $113,915 $495,899 $644,362 $7,115 $(154,872)$1,106,419 




The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
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, 202294,299,039 $113,915 $496,627 $708,149 $(68,160)$(182,912)$1,067,619 
Net income30,754 30,754 
Other comprehensive loss(28,865)(28,865)
Cash dividends declared ($0.120 per share)(11,330)(11,330)
Treasury stock acquired(715,307)(9,657)(9,657)
Treasury stock reissued17,738 81 — 164 245 
Restricted stock103,650 — 723 — (331)392 
Balance at June 30, 202293,705,120 $113,915 $497,431 $727,573 $(97,025)$(192,736)$1,049,158 
 Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
 (dollars in thousands, except share and per share data)
Balance at March 31, 202196,248,476 $113,915 $495,720 $625,806 $6,198 $(154,159)$1,087,480 
Net income29,619 29,619 
Other comprehensive income917 917 
Cash dividends declared ($0.115 per share)(11,063)(11,063)
Treasury stock acquired(72,724)(1,015)(1,015)
Treasury stock reissued15,376 90 — 133 223 
Restricted stock10,500 — 89 — 169 258 
Balance at June 30, 202196,201,628 $113,915 $495,899 $644,362 $7,115 $(154,872)$1,106,419 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
Table of Contents


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
PART I.
ITEM 1.
Consolidated Statements of Financial Condition (Unaudited)
3
Consolidated Statements of Income (Unaudited)
4
Consolidated Statements of Comprehensive Income (Unaudited)
6
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
7
Consolidated Statements of Cash Flows (Unaudited)
9
Notes to the Unaudited Consolidated Financial Statements
10
ITEM 2.
59
ITEM 3.
84
ITEM 4.
84
PART II.
ITEM 1.
85
ITEM 1A.
85
ITEM 2.
85
ITEM 3.
85
ITEM 4.
86
ITEM 5.
86
ITEM 6.
87
88

2
Table of Contents



ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
June 30, 2023December 31, 2022
 (dollars in thousands, except share data)
Assets
Cash and due from banks$123,095 $124,254 
Interest-bearing bank deposits325,774 29,990 
Securities available for sale, at fair value738,109 762,661 
Securities held to maturity, at amortized cost (Fair value of $364,615 and $386,205 at June 30, 2023 and December 31, 2022, respectively)439,922 461,162 
Other investments46,394 26,414 
Loans held for sale16,300 11,869 
Loans and leases:
Portfolio loans and leases8,799,836 7,642,143 
Allowance for credit losses(133,546)(102,906)
Net loans and leases8,666,290 7,539,237 
Premises and equipment, net124,246 115,106 
Other real estate owned324 534 
Goodwill363,715 303,328 
Amortizing intangibles, net24,736 9,205 
Bank owned life insurance227,293 222,651 
Other assets222,406 199,255 
Total assets$11,318,604 $9,805,666 
Liabilities
Deposits (all domestic):
Noninterest-bearing$2,624,344 $2,670,508 
Interest-bearing6,521,934 5,334,961 
Total deposits9,146,278 8,005,469 
Short-term borrowings542,839 372,694 
Subordinated debentures177,619 170,937 
Other long-term debt4,495 4,862 
Capital lease obligation5,162 5,425 
Total long-term debt187,276 181,224 
Other liabilities209,792 194,205 
Total liabilities10,086,185 8,753,592 
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued— — 
Common stock, $1 par value per share, 200,000,000 shares authorized; 123,603,380 and 113,914,902 shares issued at June 30, 2023 and December 31, 2022, respectively, and 102,444,915 and 93,376,314 shares outstanding at June 30, 2023 and December 31, 2022, respectively123,603 113,915 
Additional paid-in capital630,246 497,431 
Retained earnings822,619 774,863 
Accumulated other comprehensive loss, net(138,551)(137,692)
Treasury stock (21,158,465 and 20,538,588 shares at June 30, 2023 and December 31, 2022, respectively)(205,498)(196,443)
Total shareholders’ equity1,232,419 1,052,074 
Total liabilities and shareholders’ equity$11,318,604 $9,805,666 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Table of Contents


ITEM 1. Financial Statements and Supplementary Data (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2023202220232022
(dollars in thousands, except share data)
Interest Income
Interest and fees on loans and leases$120,694 $69,515 $228,362 $133,909 
Interest and dividends on investments:
Taxable interest5,634 6,286 11,423 12,764 
Interest exempt from federal income taxes114 120 231 246 
Dividends782 149 1,287 284 
Interest on bank deposits4,043 658 4,553 769 
Total interest income131,267 76,728 245,856 147,972 
Interest Expense
Interest on deposits25,901 797 41,419 1,610 
Interest on short-term borrowings5,193 18 7,594 39 
Interest on subordinated debentures2,254 2,143 4,468 4,272 
Interest on other long-term debt44 51 89 103 
Interest on lease obligations51 57 104 114 
Total interest expense33,443 3,066 53,674 6,138 
Net Interest Income97,824 73,662 192,182 141,834 
Provision for credit losses2,790 4,099 140 6,063 
Provision for credit losses - acquisition day 1 non-PCD— — 10,653 — 
Net Interest Income after Provision for Credit Losses95,034 69,563 181,389 135,771 
Noninterest Income
Net securities gains— — — 2 
Trust income2,532 2,573 5,018 5,286 
Service charges on deposit accounts5,324 4,886 10,242 9,501 
Insurance and retail brokerage commissions2,314 2,486 4,866 4,758 
Income from bank owned life insurance1,195 1,383 2,422 2,891 
Gain on sale of mortgage loans1,253 1,561 1,905 2,843 
Gain on sale of other loans and assets1,891 1,099 3,977 3,418 
Card-related interchange income7,372 7,137 14,201 13,627 
Derivatives mark to market81 42 (8)389 
Swap fee income332 1,154 577 1,607 
Other income2,229 2,188 4,286 4,163 
Total noninterest income24,523 24,509 47,486 48,485 
Noninterest Expense
Salaries and employee benefits36,735 30,949 70,999 61,881 
Net occupancy4,784 4,170 9,802 8,957 
Furniture and equipment4,284 3,857 8,522 7,587 
Data processing3,763 3,470 7,167 6,658 
Advertising and promotion1,327 1,434 2,990 2,660 
Pennsylvania shares tax1,173 913 2,425 1,918 
Intangible amortization1,282 862 2,429 1,724 
Other professional fees and services1,182 1,197 2,773 2,418 
FDIC insurance1,277 702 2,694 1,400 
Loss on sale or write-down of assets6 86 47 161 
Litigation and operational losses894 629 1,637 1,229 
Merger and acquisition related(60)— 8,481 — 
Other operating9,296 7,410 17,358 14,810 
Total noninterest expense65,943 55,679 137,324 111,403 
Income Before Income Taxes53,614 38,393 91,551 72,853 
Income tax provision10,833 7,639 18,546 14,373 
Net Income$42,781 $30,754 $73,005 $58,480 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Table of Contents


For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2023202220232022
(dollars in thousands, except share data)
Average Shares Outstanding102,530,052 94,020,240 101,056,432 94,049,308 
Average Shares Outstanding Assuming Dilution102,760,266 94,245,770 101,281,899 94,273,808 
Per Share Data: Basic Earnings per Share
$0.42 $0.33 $0.72 $0.62 
 Diluted Earnings per Share$0.42 $0.33 $0.72 $0.62 
Cash Dividends Declared per Common Share$0.125 $0.120 $0.245 $0.235 

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


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the Three Months EndedFor the Six Months Ended
 June 30,June 30,
 2023202220232022
 (dollars in thousands)
Net Income$42,781 $30,754 $73,005 $58,480 
Other comprehensive loss, before tax benefit:
Unrealized holding losses on securities arising during the period(14,116)(31,794)(3,761)(89,045)
Less: reclassification adjustment for gains on securities included in net income— — — (2)
Unrealized holding (losses) gains on derivatives arising during the period(3,581)(4,745)2,225 (22,671)
Total other comprehensive loss, before tax benefit(17,697)(36,539)(1,536)(111,718)
Income tax benefit related to items of other comprehensive loss3,716 7,674 677 23,461 
Total other comprehensive loss(13,981)(28,865)(859)(88,257)
Comprehensive Income (Loss)$28,800 $1,889 $72,146 $(29,777)

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


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
Shares
Outstanding		Common
Stock		Additional
Paid-in-
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss),
net		Treasury
Stock		Total
Shareholders’
Equity
 (dollars in thousands, except share and per share data)
Balance at December 31, 202293,376,314 $113,915 $497,431 $774,863 $(137,692)$(196,443)$1,052,074 
Net income73,005 73,005 
Other comprehensive loss(859)(859)
Cash dividends declared ($0.245 per share)(25,249)(25,249)
Treasury stock acquired(877,212)(10,889)(10,889)
Treasury stock reissued163,950 660 — 1,551 2,211 
Restricted stock93,385 — 488 — 283 771 
Common stock issued9,688,478 9,688 131,667 141,355 
Balance at June 30, 2023102,444,915 $123,603 $630,246 $822,619 $(138,551)$(205,498)$1,232,419 
 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 December 31, 202194,233,152 $113,915 $496,121 $691,260 $(8,768)$(183,156)$1,109,372 
Net income58,480 58,480 
Other comprehensive loss(88,257)(88,257)
Cash dividends declared ($0.235 per share)(22,167)(22,167)
Treasury stock acquired(805,921)(11,145)(11,145)
Treasury stock reissued174,989 580 — 1,612 2,192 
Restricted stock102,900 — 730 — (47)683 
Balance at June 30, 202293,705,120 $113,915 $497,431 $727,573 $(97,025)$(192,736)$1,049,158 




The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
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, 2023103,193,127 $123,603 $630,196 $792,720 $(124,570)$(196,935)$1,225,014 
Net income42,781 42,781 
Other comprehensive loss(13,981)(13,981)
Cash dividends declared ($0.125 per share)(12,882)(12,882)
Treasury stock acquired(768,100)(9,157)(9,157)
Treasury stock reissued20,538 50 — 195 245 
Restricted stock(650)— — — 399 399 
Balance at June 30, 2023102,444,915 $123,603 $630,246 $822,619 $(138,551)$(205,498)$1,232,419 
 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, 202294,299,039 $113,915 $496,627 $708,149 $(68,160)$(182,912)$1,067,619 
Net income30,754 30,754 
Other comprehensive loss(28,865)(28,865)
Cash dividends declared ($0.120 per share)(11,330)(11,330)
Treasury stock acquired(715,307)(9,657)(9,657)
Treasury stock reissued17,738 81 — 164 245 
Restricted stock103,650 — 723 — (331)392 
Balance at June 30, 202293,705,120 $113,915 $497,431 $727,573 $(97,025)$(192,736)$1,049,158 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
Table of Contents


ITEM 1. Financial Statements and Supplementary Data(Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months EndedFor the Six Months Ended
June 30, June 30,
20222021 20232022
Operating ActivitiesOperating Activities(dollars in thousands)Operating Activities(dollars in thousands)
Net incomeNet income$58,480 $69,389 Net income$73,005 $58,480 
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 lossesProvision for credit losses6,063 1,023 Provision for credit losses10,793 6,063 
Deferred tax expenseDeferred tax expense1,240 2,863 Deferred tax expense3,535 1,240 
Depreciation and amortizationDepreciation and amortization5,159 5,931 Depreciation and amortization1,895 5,159 
Net gains on securities and other assetsNet gains on securities and other assets(6,730)(13,205)Net gains on securities and other assets(5,521)(6,730)
Net amortization of premiums and discounts on securitiesNet amortization of premiums and discounts on securities1,131 2,588 Net amortization of premiums and discounts on securities725 1,131 
Income from increase in cash surrender value of bank owned life insuranceIncome from increase in cash surrender value of bank owned life insurance(2,891)(3,132)Income from increase in cash surrender value of bank owned life insurance(2,386)(2,891)
Decrease in interest receivable747 3,697 
(Increase) decrease in interest receivable(Increase) decrease in interest receivable(91)747 
Mortgage loans originated for saleMortgage loans originated for sale(106,160)(210,746)Mortgage loans originated for sale(83,788)(106,160)
Proceeds from sale of mortgage loansProceeds from sale of mortgage loans109,533 231,321 Proceeds from sale of mortgage loans80,749 109,533 
Increase (decrease) in interest payable119 (357)
Increase in interest payableIncrease in interest payable2,063 119 
Decrease in income taxes payableDecrease in income taxes payable(7,587)(1,870)Decrease in income taxes payable(2,206)(7,587)
Other-netOther-net1,265 (14,178)Other-net7,568 1,265 
Net cash provided by operating activitiesNet cash provided by operating activities60,369 73,324 Net cash provided by operating activities86,341 60,369 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Transactions with securities held to maturity:Transactions with securities held to maturity:Transactions with securities held to maturity:
Proceeds from maturities and redemptionsProceeds from maturities and redemptions48,863 59,170 Proceeds from maturities and redemptions21,154 48,863 
PurchasesPurchases(200)(312,247)Purchases(200)(200)
Transactions with securities available for sale:Transactions with securities available for sale:Transactions with securities available for sale:
Proceeds from salesProceeds from sales30,686 — 
Proceeds from maturities and redemptionsProceeds from maturities and redemptions88,001 285,216 Proceeds from maturities and redemptions48,521 88,001 
PurchasesPurchases— (560,180)Purchases(24,555)— 
Purchases of FHLB stockPurchases of FHLB stock(1,321)(2,134)Purchases of FHLB stock(45,719)(1,321)
Proceeds from the redemption of FHLB stockProceeds from the redemption of FHLB stock494 2,834 Proceeds from the redemption of FHLB stock38,397 494 
Proceeds from bank owned life insuranceProceeds from bank owned life insurance3,058 3,097 Proceeds from bank owned life insurance2,246 3,058 
Proceeds from sale of loansProceeds from sale of loans36,159 33,824 Proceeds from sale of loans63,839 36,159 
Proceeds from sale of other assetsProceeds from sale of other assets3,168 4,979 Proceeds from sale of other assets1,472 3,168 
Net cash received from business acquisitionNet cash received from business acquisition14,492 — 
Net increase in loans and leasesNet increase in loans and leases(315,444)(17,885)Net increase in loans and leases(274,082)(315,444)
Purchases of premises and equipment and other assetsPurchases of premises and equipment and other assets(7,360)(3,909)Purchases of premises and equipment and other assets(13,219)(7,360)
Net cash used in investing activitiesNet cash used in investing activities(144,582)(507,235)Net cash used in investing activities(136,968)(144,582)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Net decrease in other short-term borrowingsNet decrease in other short-term borrowings(49,392)(10,001)Net decrease in other short-term borrowings(2,590)(49,392)
Net increase in depositsNet increase in deposits71,073 446,426 Net increase in deposits384,365 71,073 
Repayments of other long-term debtRepayments of other long-term debt(352)(50,339)Repayments of other long-term debt(367)(352)
Repayments of capital lease obligationRepayments of capital lease obligation(246)(230)Repayments of capital lease obligation(263)(246)
Dividends paidDividends paid(22,167)(21,641)Dividends paid(25,249)(22,167)
Proceeds from reissuance of treasury stockProceeds from reissuance of treasury stock245 222 Proceeds from reissuance of treasury stock245 245 
Purchase of treasury stockPurchase of treasury stock(10,520)(2,654)Purchase of treasury stock(10,889)(10,520)
Net cash (used in) provided by financing activities(11,359)361,783 
Net decrease in cash and cash equivalents(95,572)(72,128)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities345,252 (11,359)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents294,625 (95,572)
Cash and cash equivalents at January 1Cash and cash equivalents at January 1395,372 356,581 Cash and cash equivalents at January 1154,244 395,372 
Cash and cash equivalents at June 30Cash and cash equivalents at June 30$299,800 $284,453 Cash and cash equivalents at June 30$448,869 $299,800 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
9

ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The accounting and reporting policies of First Commonwealth Financial Corporation and subsidiaries (“First Commonwealth” or the “Company”) conform with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual realized amounts could differ from those estimates. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of First Commonwealth’s financial position, results of operations, comprehensive income, cash flows and changes in shareholders’ equity as of and for the periods presented. Certain information and Note disclosures normally included in Consolidated Financial Statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest-bearing bank deposits. Generally, federal funds are sold for one-day periods.
The results of operations for the six months ended June 30, 20222023 are not necessarily indicative of the results that may be expected for the full year of 2022.2023. These interim financial statements should be read in conjunction with First Commonwealth’s 20212022 Annual Report on Form 10-K.
Note 2 Acquisition
On January 31, 2023, the Company completed its acquisition of Centric Financial Corporation (“Centric”) and its banking subsidiary, Centric Bank, for consideration of 9,688,478 shares of the Company's common stock. Through the acquisition, the Company obtained seven full-service banking offices and one loan production office in the Harrisburg, Philadelphia and Lancaster Metropolitan Service Areas ("MSAs").
The table below summarizes the net assets acquired (at fair value) and consideration transferred in connection with the Centric acquisition (dollars in thousands):
Consideration paid
     Cash paid to shareholders - fractional shares$1 
     Shares issued to shareholders (9,688,478 shares)141,355 
            Total consideration paid$141,356 
Fair value of assets acquired
    Cash and due from banks14,492 
    Investment securities34,302 
    FHLB stock7,658 
    Loans923,555 
    Premises and equipment12,123 
    Core deposit intangible16,671 
    Bank owned life insurance4,502 
    Other assets17,391 
             Total assets acquired1,030,694 
Fair value of liabilities assumed
    Deposits757,003 
    Borrowings186,716 
    Other liabilities6,006 
             Total liabilities assumed949,725 
Total fair value of identifiable net assets80,969 
Goodwill$60,387 
10
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company determined that this acquisition constitutes a business combination and therefore was accounted for using the acquisition method of accounting. Accordingly, as of the date of the acquisition, the Company recorded the assets acquired, liabilities assumed and consideration paid at fair value. The $60.4 million excess of the consideration paid over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes. The amount of goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with Centric.
The fair value of the 9,688,478 common shares issued was determined based on the $14.59 closing market price of the Company's common shares on the acquisition date, January 31, 2023.
During the three-months ended June 30, 2023, valuations were finalized for provisional amounts related to loan credit marks and a supplemental executive retirement plan liability ("SERP"). The credit marks were previously considered provisional due to the availability of data required to assess the borrowers cash flow and collateral position. After receiving additional historical financial information and meeting with the borrowers a $5.1 million decrease in fair value and increase in the allowance for credit losses was recognized. Receipt of a third party valuation for the SERP liability decreased the fair value of the liability by $0.07 million. There was no income statement impact related to the loan mark adjustment. The SERP adjustment resulted in a $34 thousand increase in SERP expense during the second quarter of 2023. As of June 30, 2023, the accounting for the business combination is considered complete.
The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company used an independent valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.
Cash and due from banks - The estimated fair value was determined to approximate the carrying amount of these assets.
Investment securities - The estimated fair value of the investment portfolio was based on quoted market prices, dealer quotes, and pricing obtained from independent pricing services.
Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for non- purchased credit-deteriorated ("non-PCD") loans and on an individual basis for purchased credit-deteriorated ("PCD") loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. Other factors included assumptions related to prepayments, probability of default and loss given default. The discount rates applied were based on a build-up approach considering the funding mix, servicing costs, liquidity premium and factors related to performance risk.
Acquired loans are classified into two categories PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. For PCD loans, an allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan.
A day 1 allowance for credit losses on non-PCD loans of $10.7 million was recorded through the provision for credit losses within the Consolidated Statements of Income. At the date of acquisition, of the $979.5 million of loans acquired from Centric, $304.7 million, or 31.1%, of Centric's loan portfolio, was accounted for as PCD loans as of February 1, 2023.
Premise and equipment - The estimated fair value of land and buildings were determined by independent market-based appraisals.
Core deposit intangible - The core deposit intangible was valued utilizing the cost savings method approach, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.
Time deposits - The estimated fair value of time deposits was determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on time deposits with similar terms and maturities.
Borrowings - The estimated fair value of short-term borrowings was determined to approximate stated value. Subordinated debentures were valued using a discounted cash flow approach incorporating a discount rate that incorporated similar terms, maturity and credit rating.
11
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table provides details related to the fair value of acquired PCD loans as of February 1, 2023.
Unpaid Principal BalancePCD Allowance for Credit Loss at Acquisition(Discount) Premium on Acquired LoansFair Value of PCD Loans at Acquisition
(dollars in thousands)
Commercial, financial, agricultural and other$84,095 $(19,417)$117 $64,795 
Time and demand84,095 (19,417)117 64,795 
Real estate construction29,947 (287)(479)29,181 
Construction other16,978 (227)(179)16,572 
Construction residential12,969 (60)(300)12,609 
Residential real estate16,564 (527)(496)15,541 
Residential first lien13,740 (197)(264)13,279 
Residential junior lien/home equity2,824 (330)(232)2,262 
Commercial real estate174,002 (6,971)(6,073)160,958 
Multifamily13,169 (234)(1,413)11,522 
Nonowner occupied97,324 (2,739)(1,902)92,683 
Owner occupied63,509 (3,998)(2,758)56,753 
Loans to individuals62 (3)(3)56 
Automobile and recreational vehicles62 (3)(3)56 
Total loans and leases$304,670 $(27,205)$(6,934)$270,531 
12
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans as of February 1, 2023.
Unpaid Principal Balance(Discount) premium on acquired loansFair Value of Non-PCD Loans at AcquisitionDay 1 Provision for Credit Losses - Non-PCD Loans
(dollars in thousands)
Commercial, financial, agricultural and other$167,606 $(5,451)$162,155 $3,482 
Time and demand165,878 (5,342)160,536 3,436 
Equipment finance4 — 4 — 
Time and demand other1,724 (109)1,615 46 
Real estate construction52,773 (1,126)51,647 1,638 
Construction other34,801 (971)33,830 1,146 
Construction residential17,972 (155)17,817 492 
Residential real estate75,041 (2,593)72,448 614 
Residential first lien53,612 (1,981)51,631 437 
Residential junior lien/home equity21,429 (612)20,817 177 
Commercial real estate378,777 (12,607)366,170 4,911 
Multifamily45,475 (1,203)44,272 514 
Nonowner occupied182,793 (5,660)177,133 2,111 
Owner occupied150,509 (5,744)144,765 2,286 
Loans to individuals640 (36)604 8 
Automobile and recreational vehicles449 (25)424 4 
Consumer other191 (11)180 4 
Total loans and leases$674,837 $(21,813)$653,024 $10,653 
The following table presents the change in goodwill during the period (dollars in thousands):
For the Six Months Ended June 30, 2023
Goodwill at December 31, 2022$303,328
Goodwill from Centric acquisition60,387 
Goodwill at June 30, 2023$363,715
Costs related to the acquisition totaled $8.5 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.
As a result of the full integration of the operations of Centric, it is not practicable to determine revenue or net income included in the Company's operating results relating to Centric since the date of acquisition as Centric results cannot be separately identified.
13
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 Supplemental Comprehensive Income Disclosures
The following table identifies the related tax effects allocated to each component of other comprehensive income (“OCI”) in the unaudited Consolidated Statements of Comprehensive Income. Reclassification adjustments related to securities available for sale are included in the "Net securities gains" line in the unaudited Consolidated Statements of Income.
For the Six Months Ended June 30,For the Six Months Ended June 30,
2022202120232022
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)(dollars in thousands)
Unrealized losses on securities:Unrealized losses on securities:Unrealized losses on securities:
Unrealized holding losses on securities arising during the periodUnrealized holding losses on securities arising during the period$(89,045)$18,700 $(70,345)$(14,097)$2,961 $(11,136)Unrealized holding losses on securities arising during the period$(3,761)$1,144 $(2,617)$(89,045)$18,700 $(70,345)
Reclassification adjustment for gains on securities included in net incomeReclassification adjustment for gains on securities included in net income(2)— (2)(16)3 (13)Reclassification adjustment for gains on securities included in net income— — — (2)— (2)
Total unrealized losses on securitiesTotal unrealized losses on securities(89,047)18,700 (70,347)(14,113)2,964 (11,149)Total unrealized losses on securities(3,761)1,144 (2,617)(89,047)18,700 (70,347)
Unrealized (losses) gains on derivatives:
Unrealized holding (losses) gains on derivatives arising during the period(22,671)4,761 (17,910)1,305 (274)1,031 
Unrealized gains (losses) on derivatives:Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) on derivatives arising during the periodUnrealized holding gains (losses) on derivatives arising during the period2,225 (467)1,758 (22,671)4,761 (17,910)
Total unrealized (losses) gains on derivatives(22,671)4,761 (17,910)1,305 (274)1,031 
Total unrealized gains (losses) on derivativesTotal unrealized gains (losses) on derivatives2,225 (467)1,758 (22,671)4,761 (17,910)
Total other comprehensive lossTotal other comprehensive loss$(111,718)$23,461 $(88,257)$(12,808)$2,690 $(10,118)Total other comprehensive loss$(1,536)$677 $(859)$(111,718)$23,461 $(88,257)

For the Three Months Ended June 30,
20232022
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized losses on securities:
Unrealized holding losses on securities arising during the period$(14,116)$2,964 $(11,152)$(31,794)$6,677 $(25,117)
Reclassification adjustment for losses on securities included in net income— — — — — — 
Total unrealized losses on securities(14,116)2,964 (11,152)(31,794)6,677 (25,117)
Unrealized losses on derivatives:
Unrealized holding losses on derivatives arising during the period(3,581)752 (2,829)(4,745)997 (3,748)
Total unrealized losses on derivatives(3,581)752 (2,829)(4,745)997 (3,748)
Total other comprehensive loss$(17,697)$3,716 $(13,981)$(36,539)$7,674 $(28,865)


1014
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,
20222021
Pretax AmountTax (Expense) BenefitNet of Tax AmountPretax AmountTax (Expense) BenefitNet of Tax Amount
(dollars in thousands)
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains on securities arising during the period$(31,794)$6,677 $(25,117)$1,707 $(358)$1,349 
Reclassification adjustment for gains on securities included in net income— — — (10)2 (8)
Total unrealized (losses) gains on securities(31,794)6,677 (25,117)1,697 (356)1,341 
Unrealized losses on derivatives:
Unrealized holding losses on derivatives arising during the period(4,745)997 (3,748)(537)113 (424)
Total unrealized losses on derivatives(4,745)997 (3,748)(537)113 (424)
Total other comprehensive (loss) income$(36,539)$7,674 $(28,865)$1,160 $(243)$917 


The following table details the change in components of OCI for the six months ended June 30:
2022202120232022
Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss) Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
(dollars in thousands) (dollars in thousands)
Balance at December 31Balance at December 31$(3,317)$95 $(5,546)$(8,768)$20,310 $(182)$(2,895)$17,233 Balance at December 31$(107,471)$268 $(30,489)$(137,692)$(3,317)$95 $(5,546)$(8,768)
Other comprehensive loss before reclassification adjustmentOther comprehensive loss before reclassification adjustment(70,345)— (17,910)(88,255)(11,136)— 1,031 (10,105)Other comprehensive loss before reclassification adjustment(2,617)— 1,758 (859)(70,345)— (17,910)(88,255)
Amounts reclassified from accumulated other comprehensive (loss) incomeAmounts reclassified from accumulated other comprehensive (loss) income(2)— — (2)(13)— — (13)Amounts reclassified from accumulated other comprehensive (loss) income— — — — (2)— — (2)
Net other comprehensive loss during the periodNet other comprehensive loss during the period(70,347)— (17,910)(88,257)(11,149)— 1,031 (10,118)Net other comprehensive loss during the period(2,617)— 1,758 (859)(70,347)— (17,910)(88,257)
Balance at June 30Balance at June 30$(73,664)$95 $(23,456)$(97,025)$9,161 $(182)$(1,864)$7,115 Balance at June 30$(110,088)$268 $(28,731)$(138,551)$(73,664)$95 $(23,456)$(97,025)

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

2022202120232022
Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss) Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)Securities Available for SalePost-Retirement ObligationDerivativesAccumulated Other Comprehensive Income (Loss)
(dollars in thousands) (dollars in thousands)
Balance at March 31Balance at March 31$(48,547)$95 $(19,708)$(68,160)$7,820 $(182)$(1,440)$6,198 Balance at March 31$(98,936)$268 $(25,902)$(124,570)$(48,547)$95 $(19,708)$(68,160)
Other comprehensive (loss) income before reclassification adjustment(25,117)— (3,748)(28,865)1,349 — (424)925 
Other comprehensive loss before reclassification adjustmentOther comprehensive loss before reclassification adjustment(11,152)— (2,829)(13,981)(25,117)— (3,748)(28,865)
Amounts reclassified from accumulated other comprehensive (loss) incomeAmounts reclassified from accumulated other comprehensive (loss) income— — — — (8)— — (8)Amounts reclassified from accumulated other comprehensive (loss) income— — — — — — — — 
Net other comprehensive (loss) income during the period(25,117)— (3,748)(28,865)1,341 — (424)917 
Net other comprehensive loss during the periodNet other comprehensive loss during the period(11,152)— (2,829)(13,981)(25,117)— (3,748)(28,865)
Balance at June 30Balance at June 30$(73,664)$95 $(23,456)$(97,025)$9,161 $(182)$(1,864)$7,115 Balance at June 30$(110,088)$268 $(28,731)$(138,551)$(73,664)$95 $(23,456)$(97,025)
11
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 34 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 months ended June 30:
2022202120232022
(dollars in thousands)(dollars in thousands)
Cash paid during the period for:Cash paid during the period for:Cash paid during the period for:
InterestInterest$5,946 $8,800 Interest$52,038 $5,946 
Income taxesIncome taxes16,621 16,209 Income taxes16,924 16,621 
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 assetsLoans transferred to other real estate owned and repossessed assets1,313 1,649 Loans transferred to other real estate owned and repossessed assets1,443 1,313 
Loans transferred from held to maturity to held for saleLoans transferred from held to maturity to held for sale31,519 30,704 Loans transferred from held to maturity to held for sale60,611 31,519 
Loans transferred from available for sale to held to maturityLoans transferred from available for sale to held to maturity(519)— 
Gross decrease in market value adjustment to securities available for saleGross decrease in market value adjustment to securities available for sale(3,761)(89,046)
Gross increase (decrease) in market value adjustment to derivativesGross increase (decrease) in market value adjustment to derivatives2,225 (22,671)
Gross decrease in market value adjustment to securities available for sale(89,046)(14,113)
Gross (decrease) increase in market value adjustment to derivatives(22,671)1,305 
Increase in limited partnership investment unfunded commitmentIncrease in limited partnership investment unfunded commitment3,350 — 
Noncash treasury stock reissuanceNoncash treasury stock reissuance1,966 1,947 
Net assets acquired through acquisitionNet assets acquired through acquisition66,477 — 
Unsettled treasury stock repurchasesUnsettled treasury stock repurchases— 625 
Noncash treasury stock reissuance1,947 2,042 
Unsettled treasury stock repurchases625 4 
Proceeds from death benefit on bank owned life insurance not received— (384)
15
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 45 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 June 30,For the Six Months Ended June 30,
20222021202220212023202220232022
Weighted average common shares issuedWeighted average common shares issued113,914,902 113,914,902 113,914,902 113,914,902 Weighted average common shares issued123,603,380 113,914,902 121,944,027 113,914,902 
Average treasury stock sharesAverage treasury stock shares(19,666,599)(17,695,829)(19,660,488)(17,707,057)Average treasury stock shares(20,824,677)(19,666,599)(20,659,899)(19,660,488)
Average deferred compensation sharesAverage deferred compensation shares(55,713)(55,582)(55,698)(55,563)Average deferred compensation shares(55,859)(55,713)(55,840)(55,698)
Average unearned nonvested shares(172,350)(150,663)(149,408)(132,474)
Average unearned non-vested sharesAverage unearned non-vested shares(192,792)(172,350)(171,856)(149,408)
Weighted average common shares and common stock equivalents used to calculate basic earnings per shareWeighted average common shares and common stock equivalents used to calculate basic earnings per share94,020,240 96,012,828 94,049,308 96,019,808 Weighted average common shares and common stock equivalents used to calculate basic earnings per share102,530,052 94,020,240 101,056,432 94,049,308 
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share169,779 213,982 168,749 180,052 
Additional common stock equivalents (non-vested stock) used to calculate diluted earnings per shareAdditional common stock equivalents (non-vested stock) used to calculate diluted earnings per share173,818 169,779 169,071 168,749 
Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per shareAdditional common stock equivalents (deferred compensation) used to calculate diluted earnings per share55,751 55,615 55,751 55,615 Additional common stock equivalents (deferred compensation) used to calculate diluted earnings per share56,396 55,751 56,396 55,751 
Weighted average common shares and common stock equivalents used to calculate diluted earnings per shareWeighted average common shares and common stock equivalents used to calculate diluted earnings per share94,245,770 96,282,425 94,273,808 96,255,475 Weighted average common shares and common stock equivalents used to calculate diluted earnings per share102,760,266 94,245,770 101,281,899 94,273,808 
Per Share Data:Per Share Data:
Basic Earnings per ShareBasic Earnings per Share$0.33 $0.31 $0.62 $0.72 Basic Earnings per Share$0.42 $0.33 $0.72 $0.62 
Diluted Earnings per ShareDiluted Earnings per Share$0.33 $0.31 $0.62 $0.72 Diluted Earnings per Share$0.42 $0.33 $0.72 $0.62 
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 months ended June 30, because to do so would have been antidilutive.
2022202120232022
Price RangePrice RangePrice RangePrice Range
SharesFromToSharesFromToSharesFromToSharesFromTo
Restricted StockRestricted Stock117,684 $13.72 $16.43 66,092 $13.72 $14.58 Restricted Stock139,684 $12.77 $16.43 117,684 $13.72 $16.43 
Restricted Stock UnitsRestricted Stock Units64,785 $16.56 $21.08 26,343 $16.41 $16.41 Restricted Stock Units28,769 $17.53 $17.53 64,785 $16.56 $21.08 

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

Note 56 Commitments and Contingent Liabilities
Commitments and Letters of Credit
Standby letters of credit and commercial letters of credit are conditional commitments issued by First Commonwealth to guarantee the performance of a customer to a third party. The contract or notional amount of these instruments reflects the maximum amount of future payments that First Commonwealth could be required to pay under the guarantees if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from collateral held or pledged. In addition, many of these commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements.
The following table identifies the notional amount of those instruments at:at the date shown below:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands) (dollars in thousands)
Financial instruments whose contract amounts represent credit risk:Financial instruments whose contract amounts represent credit risk:Financial instruments whose contract amounts represent credit risk:
Commitments to extend creditCommitments to extend credit$2,286,257 $2,353,991 Commitments to extend credit$2,576,168 $2,356,539 
Financial standby letters of creditFinancial standby letters of credit17,444 18,824 Financial standby letters of credit19,190 18,417 
Performance standby letters of creditPerformance standby letters of credit17,336 10,663 Performance standby letters of credit14,625 12,853 
Commercial letters of creditCommercial letters of credit882 975 Commercial letters of credit876 573 
 
16
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The notional amounts outstanding as of June 30, 20222023 include amounts issued in 20222023 of $7.0$0.5 million in performance standby letters of credit and $0.6$0.3 million in financial standby letters of credit. There were no commercial letters of credit issued in 2022.2023. A liability of $0.1 million has been recorded as of both June 30, 20222023 and December 31, 2021,2022, which represents the estimated fair value of letters of credit issued. The fair value of letters of credit is estimated based on the unrecognized portion of fees received at the time the commitment was issued.
Unused commitments and letters of credit provide exposure to future credit loss in the event of nonperformance by the borrower or guaranteed parties. Management’s evaluation of the credit risk related to these commitments resulted in the recording of a liability of $8.8$7.8 million and $6.4$10.0 million as of June 30, 20222023 and December 31, 2021,2022, respectively. This liability is reflected in "Other liabilities" in the unaudited Consolidated Statements of Financial Condition. The credit risk evaluation incorporates the expected loss percentage calculated for comparable loan categories as part of the allowance for credit losses for loans as well as estimated utilization for each loan category.
Legal Proceedings
First Commonwealth and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. As of June 30, 2022,2023, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against First Commonwealth or its subsidiaries will be material to First Commonwealth’s consolidated financial position. On at least a quarterly basis, First Commonwealth assesses its liabilities and contingencies in connection with such legal proceedings. For those matters where it is probable that First Commonwealth will incur losses and the amounts of the losses can be reasonably estimated, First Commonwealth records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability (if any), is between $0 and $1 million. Although First Commonwealth does not believe that the outcome of pending litigation will be material to First Commonwealth’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations and cash flows for a particular reporting period in the future.

1317
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 67 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, 2022December 31, 2021 June 30, 2023December 31, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
(dollars in thousands) (dollars in thousands)
Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential$4,644 $136 $(86)$4,694 $5,242 $420 $— $5,662 Mortgage-Backed Securities – Residential$3,851 $23 $(167)$3,707 $4,127 $37 $(181)$3,983 
Mortgage-Backed Securities – CommercialMortgage-Backed Securities – Commercial342,766 — (33,896)308,870 365,024 1,725 (4,459)362,290 Mortgage-Backed Securities – Commercial337,197 — (57,545)279,652 324,306 — (52,890)271,416 
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential566,914 191 (57,575)509,530 632,687 6,308 (9,021)629,974 Mortgage-Backed Securities – Residential496,213 34 (77,025)419,222 527,777 59 (78,847)448,989 
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises1,000 — (81)919 1,000 — (19)981 Other Government-Sponsored Enterprises1,000 — (117)883 1,000 — (118)882 
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions9,497 1 (907)8,591 9,538 89 (103)9,524 Obligations of States and Political Subdivisions9,231 — (1,217)8,014 9,482 — (1,295)8,187 
Corporate SecuritiesCorporate Securities32,049 163 (1,194)31,018 32,088 973 (112)32,949 Corporate Securities30,417 — (3,786)26,631 32,010 179 (2,985)29,204 
Total Securities Available for SaleTotal Securities Available for Sale$956,870 $491 $(93,739)$863,622 $1,045,579 $9,515 $(13,714)$1,041,380 Total Securities Available for Sale$877,909 $57 $(139,857)$738,109 $898,702 $275 $(136,316)$762,661 

Mortgage-backed securities include mortgage-backed obligations of U.S. Government agencies and obligations of U.S. Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to approximately 3040 years, with lower anticipated lives to maturity due to prepayments. All mortgage-backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact upon prepayment speeds; therefore, First Commonwealth uses computer simulation models to test the average life and yield volatility of all mortgage-backed securities under various interest rate scenarios to monitor the potential impact on earnings and interest rate risk positions.

Expected maturities will differ from contractual maturities because issuers may have the right to call or repay obligations with or without call or prepayment penalties. Other fixed income securities within the portfolio also contain prepayment risk.
1418
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, 2022,2023, by contractual maturity, are shown below.
Amortized
Cost		Estimated
Fair Value		Amortized
Cost		Estimated
Fair Value
(dollars in thousands) (dollars in thousands)
Due within 1 yearDue within 1 year$4,998 $5,007 Due within 1 year$6,253 $6,179 
Due after 1 but within 5 yearsDue after 1 but within 5 years8,879 8,808 Due after 1 but within 5 years2,386 2,233 
Due after 5 but within 10 yearsDue after 5 but within 10 years28,669 26,713 Due after 5 but within 10 years32,009 27,116 
Due after 10 yearsDue after 10 years— — Due after 10 years— — 
42,546 40,528 40,648 35,528 
Mortgage-Backed Securities (a)Mortgage-Backed Securities (a)914,324 823,094 Mortgage-Backed Securities (a)837,261 702,581 
Total Debt SecuritiesTotal Debt Securities$956,870 $863,622 Total Debt Securities$877,909 $738,109 
 
(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 $347.4$341.0 million and a fair value of $313.6$283.4 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $566.9$496.2 million and a fair value of $509.5$419.2 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.
 
Proceeds from sales, gross gains (losses) realized on sales and maturities related to securities held to maturity and securities available for sale were as follows for the six months ended June 30:
2022202120232022
(dollars in thousands) (dollars in thousands)
Proceeds from salesProceeds from sales$— $— Proceeds from sales$30,686 $— 
Gross gains (losses) realized:Gross gains (losses) realized:Gross gains (losses) realized:
Sales transactions:Sales transactions:Sales transactions:
Gross gainsGross gains$— $— Gross gains$— $— 
Gross lossesGross losses— — Gross losses— — 
— — — — 
MaturitiesMaturitiesMaturities
Gross gainsGross gains2 16 Gross gains— 2 
Gross lossesGross losses— — Gross losses— — 
2 16 — 2 
Net gainsNet gains$2 $16 Net gains$— $2 
Proceeds from sales included in above table are a result of the sale of investments acquired as part of the Centric acquisition. The securities were recorded at fair value at the time of acquisition and subsequently sold at the same value.
Securities available for sale with an estimated fair value of $674.9$406.6 million and $759.1$626.7 million were pledged as of June 30, 20222023 and December 31, 2021,2022, respectively, to secure public deposits and for other purposes required or permitted by law.
1519
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, 2022December 31, 2021 June 30, 2023December 31, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
(dollars in thousands) (dollars in thousands)
Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential$2,147 $— $(136)$2,011 $2,409 $101 $— $2,510 Mortgage-Backed Securities – Residential$1,819 $— $(201)$1,618 $2,008 $— $(224)$1,784 
Mortgage-Backed Securities- CommercialMortgage-Backed Securities- Commercial82,732 — (10,228)72,504 91,439 305 (1,939)89,805 Mortgage-Backed Securities- Commercial72,274 — (15,641)56,633 75,229 — (14,196)61,033 
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential350,888 — (38,361)312,527 387,848 2,800 (5,758)384,890 Mortgage-Backed Securities – Residential312,326 — (52,201)260,125 329,267 — (53,002)276,265 
Mortgage-Backed Securities – CommercialMortgage-Backed Securities – Commercial6,056 — (69)5,987 7,309 148 — 7,457 Mortgage-Backed Securities – Commercial3,497 — (80)3,417 4,794 — (129)4,665 
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises22,061 — (3,467)18,594 21,904 — (625)21,279 Other Government-Sponsored Enterprises22,381 — (4,362)18,019 22,221 — (4,501)17,720 
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions27,345 4 (2,052)25,297 29,402 414 (103)29,713 Obligations of States and Political Subdivisions26,625 — (2,772)23,853 26,643 — (2,865)23,778 
Debt Securities Issued by Foreign GovernmentsDebt Securities Issued by Foreign Governments1,000 — (40)960 1,000 — (3)997 Debt Securities Issued by Foreign Governments1,000 — (50)950 1,000 — (40)960 
Total Securities Held to MaturityTotal Securities Held to Maturity$492,229 $4 $(54,353)$437,880 $541,311 $3,768 $(8,428)$536,651 Total Securities Held to Maturity$439,922 $— $(75,307)$364,615 $461,162 $— $(74,957)$386,205 
The amortized cost and estimated fair value of debt securities held to maturity at June 30, 2022,2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.
Amortized
Cost		Estimated
Fair Value		Amortized
Cost		Estimated
Fair Value
(dollars in thousands) (dollars in thousands)
Due within 1 yearDue within 1 year$613 $614 Due within 1 year$1,145 $1,140 
Due after 1 but within 5 yearsDue after 1 but within 5 years6,164 6,092 Due after 1 but within 5 years11,814 11,181 
Due after 5 but within 10 yearsDue after 5 but within 10 years43,066 37,702 Due after 5 but within 10 years36,484 30,071 
Due after 10 yearsDue after 10 years563 443 Due after 10 years563 430 
50,406 44,851 50,006 42,822 
Mortgage-Backed Securities (a)Mortgage-Backed Securities (a)441,823 393,029 Mortgage-Backed Securities (a)389,916 321,793 
Total Debt SecuritiesTotal Debt Securities$492,229 $437,880 Total Debt Securities$439,922 $364,615 
(b)(a)Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds. Mortgage-Backed Securities include an amortized cost of $84.9$74.1 million and a fair value of $74.5$58.3 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $356.9$315.8 million and a fair value of $318.5$263.5 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.
Securities held to maturity with an amortized cost of $351.0$118.9 million and $313.9$368.8 million were pledged as of June 30, 20222023 and December 31, 2021,2022, respectively, to secure public deposits and for other purposes required or permitted by law.
Other Investments
As a member of the Federal Home Loan Bank ("FHLB"), First Commonwealth is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. The level of stock required to be held is dependent on the amount of First Commonwealth's mortgage-related assets and outstanding borrowings with the FHLB. This stock is restricted in that it can
1620
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, 20222023 and December 31, 2021,2022, our FHLB stock totaled $12.5$40.2 million and $11.7$25.2 million, respectively, and is included in “Other investments” on the unaudited Consolidated Statements of Financial Condition.
FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities during the three and six months ended June 30, 2022.2023.
As of both June 30, 20222023 and December 31, 2021,2022, "Other investments" also includes $6.2 million and $1.2 million, respectively, in equity securities. These securities do not have a readily determinable fair value and are carried at cost. During the six-months ended June 30, 20222023 and 2021,2022, there were no gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.
Impairment of Investment Securities
We review our investment portfolio on a quarterly basis for indications of impairment. For available for sale securities, the
review includes analyzing the financial condition and near-term prospects of the issuer, including any specific events which
may influence the operations of the issuer and whether we are more likely than not to sell the security. We evaluate whether we
are more likely than not to sell debt securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. Held-to-maturity securities are
evaluated for impairment on a quarterly basis using historical probability of default and loss given default information specific
to the investment category. If this evaluation determines that credit losses exist an allowance for credit loss is recorded and
included in earnings as a component of credit loss expense.
First Commonwealth utilizes the specific identification method to determine the net gain or loss on debt securities and the average cost method to determine the net gain or loss on equity securities.
The following table presents the gross unrealized losses and estimated fair values at June 30, 20222023 for both available for sale and held to maturity securities by investment category and time frame for which securities have been in a continuous unrealized loss position:
 
Less Than 12 Months12 Months or MoreTotal Less Than 12 Months12 Months or MoreTotal
Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		 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 – ResidentialMortgage-Backed Securities – Residential$4,269 $(222)$— $— $4,269 $(222)Mortgage-Backed Securities – Residential$315 $(1)$3,483 $(367)$3,798 $(368)
Mortgage-Backed Securities – CommercialMortgage-Backed Securities – Commercial341,750 (37,603)39,624 (6,521)381,374 (44,124)Mortgage-Backed Securities – Commercial24,199 (283)312,085 (72,903)336,284 (73,186)
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential542,171 (48,546)273,596 (47,390)815,767 (95,936)Mortgage-Backed Securities – Residential11,080 (546)666,343 (128,680)677,423 (129,226)
Mortgage-Backed Securities – CommercialMortgage-Backed Securities – Commercial5,987 (69)— — 5,987 (69)Mortgage-Backed Securities – Commercial— — 3,418 (80)3,418 (80)
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises— — 19,513 (3,548)19,513 (3,548)Other Government-Sponsored Enterprises— — 18,902 (4,479)18,902 (4,479)
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions24,376 (2,589)2,535 (370)26,911 (2,959)Obligations of States and Political Subdivisions9,018 (235)22,403 (3,754)31,421 (3,989)
Debt Securities Issued by Foreign GovernmentsDebt Securities Issued by Foreign Governments960 (40)— — 960 (40)Debt Securities Issued by Foreign Governments198 (3)753 (47)951 (50)
Corporate SecuritiesCorporate Securities12,902 (1,098)4,981 (96)17,883 (1,194)Corporate Securities11,138 (278)15,492 (3,508)26,630 (3,786)
Total SecuritiesTotal Securities$932,415 $(90,167)$340,249 $(57,925)$1,272,664 $(148,092)Total Securities$55,948 $(1,346)$1,042,879 $(213,818)$1,098,827 $(215,164)
    
At June 30, 2022,2023, fixed income securities issued by the U.S. Government and U.S. Government-sponsored enterprises comprised 97%96% of total unrealized losses. All unrealized losses are the result of changes in market interest rates. At June 30, 2022,2023, there are 190219 debt securities in an unrealized loss position.
1721
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, 20212022 by investment category and the time frame for which securities have been in a continuous unrealized loss position:
Less Than 12 Months12 Months or MoreTotal Less Than 12 Months12 Months or MoreTotal
Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		 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 – ResidentialMortgage-Backed Securities – Residential$3,734 $(405)$— $— $3,734 $(405)
Mortgage-Backed Securities - CommercialMortgage-Backed Securities - Commercial$320,414 $(6,398)$— $— $320,414 $(6,398)Mortgage-Backed Securities - Commercial92,208 (12,364)240,241 (54,722)332,449 (67,086)
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – ResidentialMortgage-Backed Securities – Residential658,965 (14,779)— — 658,965 (14,779)Mortgage-Backed Securities – Residential239,760 (21,543)482,195 (110,306)721,955 (131,849)
Mortgage-Backed Securities – CommercialMortgage-Backed Securities – Commercial4,666 (129)— — 4,666 (129)
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises22,261 (644)— — 22,261 (644)Other Government-Sponsored Enterprises— — 18,603 (4,619)18,603 (4,619)
Obligation of States and Political SubdivisionsObligation of States and Political Subdivisions11,213 (206)— — 11,213 (206)Obligation of States and Political Subdivisions21,234 (1,979)9,230 (2,181)30,464 (4,160)
Debt Securities Issued by Foreign GovernmentsDebt Securities Issued by Foreign Governments997 (3)— — 997 (3)Debt Securities Issued by Foreign Governments587 (13)373 (27)960 (40)
Corporate SecuritiesCorporate Securities19,013 (112)— — 19,013 (112)Corporate Securities14,406 (590)12,632 (2,395)27,038 (2,985)
Total SecuritiesTotal Securities$1,032,863 $(22,142)$— $— $1,032,863 $(22,142)Total Securities$376,595 $(37,023)$763,274 $(174,250)$1,139,869 $(211,273)
As of June 30, 2022,2023, our corporate securities had an amortized cost and an estimated fair value of $32.0$30.4 million and $31.0$26.6 million, respectively. As of December 31, 2021,2022, our corporate securities had an amortized cost and estimated fair value of $32.1$32.0 million and $32.9$29.2 million, respectively. Corporate securities are comprised of debt issued by large regional banks. There were 4eight and six corporate securities, respectively, in an unrealized loss position as of June 30, 20222023 and December 31, 2021.2022. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trends and capital position to determine whether the unrealized loss position is a result of credit losses. All interest payments on the corporate securities are being made as contractually required.
There was no expected credit related impairment recognized on investment securities during the six months ended June 30, 20222023 and 2021.2022.
1822
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 78 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 $4.8$7.4 million and $0.8$5.9 million as of June 30, 20222023 and December 31, 2021,2022, respectively, and discounts on purchased loans from acquisitions were $5.7$30.1 million and $6.0$5.4 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The following table provides outstanding balances related to each of our loan types:
 
June 30, 2022December 31, 2021
 (dollars in thousands)
Commercial, financial, agricultural and other$1,170,583 $1,173,452 
Time and demand1,031,930 1,159,524 
Commercial credit cards16,329 13,928 
Equipment finance21,062 
Time and demand other101,262 
Real estate construction392,992 494,456 
Construction other292,400 
Construction residential100,592 
Residential real estate2,100,201 1,920,250 
Residential first lien1,459,861 1,299,534 
Residential junior lien/home equity640,340 620,716 
Commercial real estate2,319,094 2,251,097 
Multifamily360,335 385,432 
Nonowner occupied1,510,804 1,465,247 
Owner occupied447,955 400,418 
Loans to individuals1,136,884 999,975 
Automobile and recreational vehicles1,047,104 901,280 
Consumer credit cards8,717 11,151 
Consumer other81,063 87,544 
Total loans and leases$7,119,754 $6,839,230 
In the table above, Commercial, financial, agricultural and other loans at June 30, 2022 and December 31, 2021 includes $12.9 million and $71.3 million, respectively, in Paycheck Protection Program ("PPP") loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. Although the Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liability to the Company associated with participation in the program.
June 30, 2023December 31, 2022
 (dollars in thousands)
Commercial, financial, agricultural and other$1,501,994 $1,211,706 
Time and demand1,229,231 1,023,824 
Commercial credit cards13,119 13,920 
Equipment finance154,152 79,674 
Time and demand other105,492 94,288 
Real estate construction574,799 513,101 
Construction other474,720 395,439 
Construction residential100,079 117,662 
Residential real estate2,364,109 2,194,669 
Residential first lien1,694,744 1,547,192 
Residential junior lien/home equity669,365 647,477 
Commercial real estate3,004,962 2,425,012 
Multifamily515,875 431,151 
Nonowner occupied1,815,364 1,510,347 
Owner occupied673,723 483,514 
Loans to individuals1,353,972 1,297,655 
Automobile and recreational vehicles1,272,557 1,210,451 
Consumer credit cards9,943 10,657 
Consumer other71,472 76,547 
Total loans and leases$8,799,836 $7,642,143 
First Commonwealth’s loan portfolio includes five primary loan categories. When calculating the allowance for credit losses these categories are classified into fourteen portfolio segments. The composition of loans by portfolio segment includes:
Commercial, financial, agricultural and other
Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. At June 30, 2023 and December 31, 2022, this category includes $2.9 million and $4.3 million in Paycheck Protection Program ("PPP") loans for small businesses. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans.
Commercial Credit Cards - Consists of unsecured credit cards for commercial customers. These commercial credit cards have separate characteristics outside of normal commercial non-real estate loans, as they tend to have shorter overall duration. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
19
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.
23
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Time & Demand Other - Consists primarily of loans to state and political subdivisions and other commercial loans that have different characteristics than loans in the Time and Demand category. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of household debt to income and economic conditions measured by GDP. Prior to the first quarter of 2022, these loans were included in the Time and Demand category. The breakout into a separate category is the result of an annual review of the peer group loss history and loss drivers used in the allowance for credit losses model.
Real estate construction
Construction Other - Consists of construction loans to commercial builders and developers and are secured by the properties under development.
Construction Residential - Consists of loans to finance the construction of residential properties during the construction period. Borrowers are typically individuals who will occupy the completed single family property.
The risk and loss characteristics of these two construction categories are different than other real estate secured categories due to the collateral being at various stages of completion. The nature of the project and type of borrower of the two construction categories provides for unique risk and loss characteristics for each category. The primary macroeconomic drivers for estimating credit losses for construction loans include forecasts of national unemployment and measures of completed construction projects. Prior to the first quarter of 2022, all construction loans were included in one loan category. The breakout into separate construction categories is the result of an annual review of the peer group loss history and loss drivers used in the allowance for credit losses model.
Residential real estate
Residential first lien - Consists of loans with collateral of 1-4 family residencies with a senior lien position. The risk and loss characteristics are unique for this group because the collateral for these loans are the borrower’s primary residence. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.
Residential Junior Lien/Home Equity - Consists of loans with collateral of 1-4 family residencies with an open end line of credit or junior lien position. The junior lien position for the majority of these loans provides a higher risk of loss than other residential real estate loans. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.
Commercial real estate
Multifamily - Consists of loans secured by commercial multifamily properties. Real estate related to rentals to consumers provide unique risk and loss characteristics. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of commercial real estate values and national unemployment. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, national unemployment replaced rental vacancy as one of the primary macroeconomic drivers in this category.
Nonowner Occupied - Consists of loans secured by commercial real estate non-owner occupied and provides different loss characteristics than other real estate categories. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Owner Occupied - Consists of loans secured by commercial real estate owner occupied properties. The risk and loss characteristics of this category were considered different than other real estate categories because it is owner occupied and would impact the ability to conduct business. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Loans to individuals
Automobile and Recreational Vehicles - Consists of both direct and indirect loans with automobiles and recreational vehicles held as collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and automobile retention value.
20
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consumer Credit Cards – Consists of unsecured consumer credit cards. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and economic conditions measured by GDP.
Other Consumer - Consists of lines of credit, student loans and other consumer loans, not secured by real estate or autos. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and retail sales. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, retail sales replaced household debt as one of the primary macroeconomic factors for this category.
The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default, and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally
24
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was 3.58%3.52% and during the one-year forecast period it was projected to average 4.28%4.47%, with a peak of 4.59%4.83%. Current forecast assumptions consider the impact of rising interest rates, global oil prices and supply chain disruption, COVID-19, inflation, Russia's invasion of Ukraine and the potential effects of these on the US economy.
Credit Quality Information
As part of the on-going monitoring of credit quality within the loan portfolio, the following credit worthiness categories are used in grading our loans:
Pass  Acceptable levels of risk exist in the relationship. Includes all loans not classified as OAEM, substandard or doubtful.
Other Assets Especially Mentioned (OAEM)Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in deterioration of the repayment prospects or weaken the Company’s credit position at some future date. The credit risk may be relatively minor, yet constitute an undesirable risk in light of the circumstances surrounding the specific credit. No loss of principal or interest is expected.
SubstandardWell-defined weakness or a weakness that jeopardizes the repayment of the debt. A loan may be classified as substandard as a result of deterioration of the borrower’s financial condition and repayment capacity. Loans for which repayment plans have not been met or collateral equity margins do not protect the Company may also be classified as substandard.
DoubtfulLoans with the characteristics of substandard loans with the added characteristic that collection or liquidation in full, on the basis of presently existing facts and conditions, is highly improbable.

The 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.
2125
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, 2022 June 30, 2023
Non-PassNon-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotalPassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)(dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$1,130,005 $25,367 $15,211 $— $— $40,578 $1,170,583 Commercial, financial, agricultural and other$1,390,575 $69,846 $41,573 $— $— $111,419 $1,501,994 
Time and demandTime and demand991,400 25,367 15,163 — — 40,530 1,031,930 Time and demand1,117,957 69,846 41,428 — — 111,274 1,229,231 
Commercial credit cardsCommercial credit cards16,329 — — — — — 16,329 Commercial credit cards13,119 — — — — — 13,119 
Equipment financeEquipment finance21,062 — — — — — 21,062 Equipment finance154,028 — 124 — — 124 154,152 
Time and demand otherTime and demand other101,214 — 48 — — 48 101,262 Time and demand other105,471 — 21 — — 21 105,492 
Real estate constructionReal estate construction392,992 — — — — — 392,992 Real estate construction573,123 1,676 — — — 1,676 574,799 
Construction otherConstruction other292,400 — — — — — 292,400 Construction other473,044 1,676 — — — 1,676 474,720 
Construction residentialConstruction residential100,592 — — — — — 100,592 Construction residential100,079 — — — — — 100,079 
Residential real estateResidential real estate2,093,809 508 5,884 — — 6,392 2,100,201 Residential real estate2,354,041 2,091 7,977 — — 10,068 2,364,109 
Residential first lienResidential first lien1,456,372 442 3,047 — — 3,489 1,459,861 Residential first lien1,688,793 2,091 3,860 — — 5,951 1,694,744 
Residential junior lien/home equityResidential junior lien/home equity637,437 66 2,837 — — 2,903 640,340 Residential junior lien/home equity665,248 — 4,117 — — 4,117 669,365 
Commercial real estateCommercial real estate2,219,583 71,107 28,404 — — 99,511 2,319,094 Commercial real estate2,921,522 57,039 26,401 — — 83,440 3,004,962 
MultifamilyMultifamily348,699 11,577 59 — — 11,636 360,335 Multifamily515,296 470 109 — — 579 515,875 
Nonowner occupiedNonowner occupied1,433,203 54,518 23,083 — — 77,601 1,510,804 Nonowner occupied1,760,549 32,010 22,805 — — 54,815 1,815,364 
Owner occupiedOwner occupied437,681 5,012 5,262 — — 10,274 447,955 Owner occupied645,677 24,559 3,487 — — 28,046 673,723 
Loans to individualsLoans to individuals1,136,585 — 299 — — 299 1,136,884 Loans to individuals1,353,504 — 468 — — 468 1,353,972 
Automobile and recreational vehiclesAutomobile and recreational vehicles1,046,879 — 225 — — 225 1,047,104 Automobile and recreational vehicles1,272,207 — 350 — — 350 1,272,557 
Consumer credit cardsConsumer credit cards8,717 — — — — — 8,717 Consumer credit cards9,943 — — — — — 9,943 
Consumer otherConsumer other80,989 — 74 — — 74 81,063 Consumer other71,354 — 118 — — 118 71,472 
Total loans and leasesTotal loans and leases$6,972,974 $96,982 $49,798 $— $— $146,780 $7,119,754 Total loans and leases$8,592,765 $130,652 $76,419 $— $— $207,071 $8,799,836 
2226
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 
December 31, 2021 December 31, 2022
Non-PassNon-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotalPassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)(dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$1,121,234 $33,765 $18,453 $— $— $52,218 $1,173,452 Commercial, financial, agricultural and other$1,164,193 $35,389 $12,124 $— $— $47,513 $1,211,706 
Time and demandTime and demand1,107,306 33,765 18,453 — — 52,218 1,159,524 Time and demand976,346 35,389 12,089 — — 47,478 1,023,824 
Commercial credit cardsCommercial credit cards13,928 — — — — — 13,928 Commercial credit cards13,920 — — — — — 13,920 
Equipment financeEquipment finance79,674 — — — — — 79,674 
Time and demand otherTime and demand other94,253 — 35 — — 35 94,288 
Real estate constructionReal estate construction493,913 498 45 — — 543 494,456 Real estate construction513,101 — — — — — 513,101 
Construction otherConstruction other395,439 — — — — — 395,439 
Construction residentialConstruction residential117,662 — — — — — 117,662 
Residential real estateResidential real estate1,913,064 976 6,210 — — 7,186 1,920,250 Residential real estate2,187,780 736 6,153 — — 6,889 2,194,669 
Residential first lienResidential first lien1,295,524 905 3,105 — — 4,010 1,299,534 Residential first lien1,542,854 675 3,663 — — 4,338 1,547,192 
Residential junior lien/home equityResidential junior lien/home equity617,540 71 3,105 — — 3,176 620,716 Residential junior lien/home equity644,926 61 2,490 — — 2,551 647,477 
Commercial real estateCommercial real estate2,113,123 85,324 52,650 — — 137,974 2,251,097 Commercial real estate2,347,000 52,291 25,721 — — 78,012 2,425,012 
MultifamilyMultifamily355,702 14,565 15,165 — — 29,730 385,432 Multifamily430,613 488 50 — — 538 431,151 
Nonowner occupiedNonowner occupied1,368,922 63,783 32,542 — — 96,325 1,465,247 Nonowner occupied1,439,478 49,037 21,832 — — 70,869 1,510,347 
Owner occupiedOwner occupied388,499 6,976 4,943 — — 11,919 400,418 Owner occupied476,909 2,766 3,839 — — 6,605 483,514 
Loans to individualsLoans to individuals999,770 — 205 — — 205 999,975 Loans to individuals1,297,206 — 449 — — 449 1,297,655 
Automobile and recreational vehiclesAutomobile and recreational vehicles901,132 — 148 — — 148 901,280 Automobile and recreational vehicles1,210,090 — 361 — — 361 1,210,451 
Consumer credit cardsConsumer credit cards11,151 — — — — — 11,151 Consumer credit cards10,657 — — — — — 10,657 
Consumer otherConsumer other87,487 — 57 — — 57 87,544 Consumer other76,459 — 88 — — 88 76,547 
Total loans and leasesTotal loans and leases$6,641,104 $120,563 $77,563 $— $— $198,126 $6,839,230 Total loans and leases$7,509,280 $88,416 $44,447 $— $— $132,863 $7,642,143 

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by origination year:
June 30, 2023
Term LoansRevolving Loans
20232022202120202019PriorTotal
(dollars in thousands)
Time and demand$86,981 $222,631 $159,642 $75,577 $73,505 $87,805 $523,090 $1,229,231 
Pass86,390 208,288 141,792 64,392 61,428 81,859 473,808 1,117,957 
OAEM— 9,190 10,021 2,271 5,250 1,493 41,621 69,846 
Substandard591 5,153 7,829 8,914 6,827 4,453 7,661 41,428 
Gross charge-offs— — — — (2,312)(522)(3,636)(6,470)
Gross recoveries— — — 53 4 106 5 168 
Commercial credit cards— — — — — — 13,119 13,119 
Pass— — — — — — 13,119 13,119 
Gross charge-offs— — — — — — (35)(35)
Gross recoveries— — — — — — 7 7 
2327
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2022June 30, 2023
Term LoansRevolving LoansTerm LoansRevolving Loans
20222021202020192018PriorTotal20232022202120202019PriorTotal
(dollars in thousands)(dollars in thousands)
Time and demand$93,111 $178,511 $82,977 $115,010 $70,013 $65,734 $426,574 $1,031,930 
Pass93,111 178,090 73,731 101,373 69,772 57,500 417,823 991,400 
OAEM— 421 9,017 2,381 161 7,136 6,251 25,367 
Substandard— — 229 11,256 80 1,098 2,500 15,163 
Commercial credit cards— — — — — — 16,329 16,329 
Pass— — — — — — 16,329 16,329 
Equipment financeEquipment finance21,062 — — — — — — 21,062 Equipment finance82,329 71,823 — — — — — 154,152 
PassPass21,062 — — — — — — 21,062 Pass82,329 71,699 — — — — — 154,028 
SubstandardSubstandard— 124 — — — — — 124 
Gross charge-offsGross charge-offs— (45)— — — — — (45)
Gross recoveriesGross recoveries— — — — — — — — 
Time and demand otherTime and demand other2,932 20,270 21,067 5,219 2,938 42,838 5,998 101,262 Time and demand other1,954 6,458 18,254 20,143 3,368 49,337 5,978 105,492 
PassPass2,932 20,270 21,067 5,219 2,938 42,790 5,998 101,214 Pass1,954 6,458 18,254 20,143 3,368 49,316 5,978 105,471 
SubstandardSubstandard— — — — — 48 — 48 Substandard— — — — — 21 — 21 
Gross charge-offsGross charge-offs— — — — — — (790)(790)
Gross recoveriesGross recoveries— — — — — — 79 79 
Construction otherConstruction other14,769 109,217 83,590 59,661 23,733 1,136 294 292,400 Construction other26,406 150,560 210,341 51,140 21,686 14,226 361 474,720 
Pass14,769 109,217 83,590 59,661 23,733 1,136 294 292,400 
Substandard— — — — — — — — 
Construction residential15,649 82,436 1,763 726 17 — 1 100,592 
PassPass15,649 82,436 1,763 726 17 — 1 100,592 Pass26,406 150,560 208,665 51,140 21,686 14,226 361 473,044 
OAEMOAEM— — — — — — — — OAEM— — 1,676 — — — — 1,676 
Gross charge-offsGross charge-offs— — — — — — — — 
Gross recoveriesGross recoveries— — — — — — — — 
Construction residentialConstruction residential7,649 79,708 2,752 5,593 3,549 — 828 100,079 
PassPass7,649 79,708 2,752 5,593 3,549 — 828 100,079 
Gross charge-offsGross charge-offs— — — — — — — — 
Gross recoveriesGross recoveries— — — — — — — — 
Residential first lienResidential first lien178,864 453,634 352,616 110,550 74,971 286,920 2,306 1,459,861 Residential first lien63,442 333,721 548,684 331,918 100,996 313,784 2,199 1,694,744 
PassPass178,864 453,623 352,599 110,289 74,395 284,373 2,229 1,456,372 Pass63,438 333,721 546,717 331,828 100,189 310,968 1,932 1,688,793 
OAEMOAEM— — — — 59 306 77 442 OAEM— — 1,556 — 127 331 77 2,091 
SubstandardSubstandard— 11 17 261 517 2,241 — 3,047 Substandard4 — 411 90 680 2,485 190 3,860 
Gross charge-offsGross charge-offs— (1)— (4)(1)(11)— (17)
Gross recoveriesGross recoveries— — — — — 43 — 43 
Residential junior lien/home equityResidential junior lien/home equity44,775 53,317 1,755 2,595 2,115 5,294 530,489 640,340 Residential junior lien/home equity29,270 74,900 47,459 2,031 2,777 5,983 506,945 669,365 
PassPass44,775 53,317 1,755 2,523 2,115 5,151 527,801 637,437 Pass29,270 74,900 47,459 2,031 2,715 5,907 502,966 665,248 
OAEM— — — — — 56 10 66 
SubstandardSubstandard— — — 72 — 87 2,678 2,837 Substandard— — — — 62 76 3,979 4,117 
Gross charge-offsGross charge-offs— — — — — — (63)(63)
Gross recoveriesGross recoveries— — — — — — 28 28 
MultifamilyMultifamily43,904 89,606 65,100 42,286 20,166 97,915 1,358 360,335 Multifamily3,346 155,372 122,015 91,119 32,161 110,074 1,788 515,875 
PassPass43,904 89,606 65,100 42,286 20,166 86,279 1,358 348,699 Pass3,346 155,372 122,015 91,119 32,161 109,495 1,788 515,296 
OAEMOAEM— — — — — 11,577 — 11,577 OAEM— — — — — 470 — 470 
SubstandardSubstandard— — — — — 59 — 59 Substandard— — — — — 109 — 109 
Gross charge-offsGross charge-offs— — — — — — — — 
Gross recoveriesGross recoveries— — — — — — — — 
Nonowner occupiedNonowner occupied144,401 176,376 109,101 217,499 178,281 681,188 3,958 1,510,804 Nonowner occupied121,605 414,983 167,587 164,734 233,055 703,777 9,623 1,815,364 
PassPass144,401 176,376 109,101 217,499 141,473 641,555 2,798 1,433,203 Pass121,605 414,501 167,587 156,955 231,429 658,914 9,558 1,760,549 
OAEMOAEM— — — — 28,972 24,544 1,002 54,518 OAEM— — — 7,779 1,468 22,763 — 32,010 
SubstandardSubstandard— — — — 7,836 15,089 158 23,083 Substandard— 482 — — 158 22,100 65 22,805 
Gross charge-offsGross charge-offs— — — — — — — — 
Gross recoveriesGross recoveries— — — — — 124 — 124 
Owner occupiedOwner occupied68,246 86,755 62,207 49,040 28,350 147,811 5,546 447,955 Owner occupied41,099 153,235 139,364 89,967 64,318 176,186 9,554 673,723 
PassPass68,246 86,732 60,441 47,352 27,836 141,640 5,434 437,681 Pass41,099 152,637 137,735 85,417 46,209 173,102 9,478 645,677 
OAEMOAEM— — 775 836 514 2,854 33 5,012 OAEM— 598 1,007 3,801 17,454 1,666 33 24,559 
SubstandardSubstandard— 23 991 852 — 3,317 79 5,262 Substandard— — 622 749 655 1,418 43 3,487 
Automobile and recreational vehicles319,430 386,347 206,560 92,660 31,796 10,311 — 1,047,104 
Pass319,430 386,345 206,518 92,572 31,732 10,282 — 1,046,879 
Substandard— 2 42 88 64 29 — 225 
Consumer credit cards— — — — — — 8,717 8,717 
Pass— — — — — — 8,717 8,717 
Consumer other3,214 19,349 3,342 5,681 3,145 4,894 41,438 81,063 
Pass3,214 19,349 3,342 5,676 3,139 4,889 41,380 80,989 
Substandard— — — 5 6 5 58 74 
Total$950,357 $1,655,818 $990,078 $700,927 $435,525 $1,344,041 $1,043,008 $7,119,754 
Gross charge-offsGross charge-offs— — — — — (1,517)— (1,517)
Gross recoveriesGross recoveries— — — — — 12 — 12 
2428
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021June 30, 2023
Term LoansRevolving LoansTerm LoansRevolving Loans
20212020201920182017PriorTotal20232022202120202019PriorTotal
(dollars in thousands)(dollars in thousands)
Time and demand$281,244 $126,403 $143,030 $91,118 $45,442 $111,127 $361,160 $1,159,524 
Pass280,854 125,728 128,080 83,204 31,472 102,399 355,569 1,107,306 
OAEM390 596 1,125 7,780 13,945 7,126 2,803 33,765 
Substandard— 79 13,825 134 25 1,602 2,788 18,453 
Commercial credit cards— — — — — — 13,928 13,928 
Pass— — — — — — 13,928 13,928 
Real estate construction202,016 129,298 123,153 38,267 441 841 440 494,456 
Pass201,992 128,824 123,153 38,267 441 796 440 493,913 
OAEM24 474 — — — — — 498 
Substandard— — — — — 45 — 45 
Residential first lien376,106 375,904 126,788 84,484 74,268 260,010 1,974 1,299,534 
Pass376,095 375,885 126,618 84,079 74,135 256,815 1,897 1,295,524 
OAEM— — — 67 — 761 77 905 
Substandard11 19 170 338 133 2,434 — 3,105 
Residential junior lien/home equity56,861 1,999 3,322 2,684 1,009 5,348 549,493 620,716 
Pass56,861 1,999 3,246 2,684 1,009 5,195 546,546 617,540 
OAEM— — — — — 61 10 71 
Substandard— — 76 — — 92 2,937 3,105 
Multifamily90,062 73,068 16,782 36,523 63,872 103,774 1,351 385,432 
Pass90,062 73,068 16,782 21,846 49,832 102,761 1,351 355,702 
OAEM— — — — 14,040 525 — 14,565 
Substandard— — — 14,677 — 488 — 15,165 
Nonowner occupied194,137 98,840 202,236 173,053 177,295 615,943 3,743 1,465,247 
Pass194,137 98,840 202,236 155,293 152,174 563,743 2,499 1,368,922 
OAEM— — — 3,723 19,235 39,737 1,088 63,783 
Substandard— — — 14,037 5,886 12,463 156 32,542 
Owner occupied77,710 62,380 53,954 34,115 32,989 134,713 4,557 400,418 
Pass77,710 59,973 51,513 33,623 31,644 129,593 4,443 388,499 
OAEM— 2,194 1,220 492 1,321 1,716 33 6,976 
Substandard— 213 1,221 — 24 3,404 81 4,943 
Automobile and recreational vehiclesAutomobile and recreational vehicles456,730 252,518 122,943 48,375 17,230 3,484 — 901,280 Automobile and recreational vehicles255,446 533,069 278,997 141,368 50,595 13,082 — 1,272,557 
PassPass456,730 252,518 122,867 48,361 17,224 3,432 — 901,132 Pass255,446 533,069 278,957 141,226 50,490 13,019 — 1,272,207 
SubstandardSubstandard— — 76 14 6 52 — 148 Substandard— — 40 142 105 63 — 350 
Gross charge-offsGross charge-offs— (638)(361)(321)(194)(72)— (1,586)
Gross recoveriesGross recoveries— 111 106 212 196 77 — 702 
Consumer credit cardsConsumer credit cards— — — — — — 11,151 11,151 Consumer credit cards— — — — — — 9,943 9,943 
PassPass— — — — — — 11,151 11,151 Pass— — — — — — 9,943 9,943 
Gross charge-offsGross charge-offs— — — — — — (146)(146)
Gross recoveriesGross recoveries— — — — — — 47 47 
Consumer otherConsumer other22,156 4,655 8,030 5,084 542 5,503 41,574 87,544 Consumer other3,454 5,453 15,024 1,964 2,236 4,175 39,166 71,472 
PassPass22,156 4,655 8,030 5,084 542 5,460 41,560 87,487 Pass3,454 5,453 15,024 1,964 2,209 4,171 39,079 71,354 
SubstandardSubstandard— — — — — 43 14 57 Substandard— — — — 27 4 87 118 
Total$1,757,022 $1,125,065 $800,238 $513,703 $413,088 $1,240,743 $989,371 $6,839,230 
Gross charge-offsGross charge-offs— (75)(27)(6)(77)(11)(361)(557)
Gross recoveriesGross recoveries— 49 1 5 26 32 65 178 
Total loans and leasesTotal loans and leases$722,981 $2,201,913 $1,710,119 $975,554 $588,246 $1,478,429 $1,122,594 $8,799,836 
Total charge-offsTotal charge-offs— (759)(388)(331)(2,584)(2,133)(5,031)(11,226)
Total recoveriesTotal recoveries— 160 107 270 226 394 231 1,388 
29
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022
Term LoansRevolving Loans
20222021202020192018PriorTotal
(dollars in thousands)
Time and demand$180,134 $165,064 $66,006 $88,959 $57,030 $57,907 $408,724 $1,023,824 
Pass180,134 154,542 56,592 79,935 56,718 56,309 392,116 976,346 
OAEM— 10,489 8,387 1,846 250 895 13,522 35,389 
Substandard— 33 1,027 7,178 62 703 3,086 12,089 
Commercial credit cards— — — — — — 13,920 13,920 
Pass— — — — — — 13,920 13,920 
Equipment finance79,674 — — — — — — 79,674 
Pass79,674 — — — — — — 79,674 
Time and demand other7,172 20,281 19,626 3,823 2,885 36,197 4,304 94,288 
Pass7,172 20,281 19,626 3,823 2,885 36,162 4,304 94,253 
Substandard— — — — — 35 — 35 
Construction other81,870 179,919 85,264 23,001 24,005 1,011 369 395,439 
Pass81,870 179,919 85,264 23,001 24,005 1,011 369 395,439 
Construction residential82,829 34,783 — 31 18 — 1 117,662 
Pass82,829 34,783 — 31 18 — 1 117,662 
Residential first lien272,136 507,573 337,995 102,870 69,890 255,573 1,155 1,547,192 
Pass272,136 507,042 337,979 102,097 69,212 253,310 1,078 1,542,854 
OAEM— 164 — 133 51 250 77 675 
Substandard— 367 16 640 627 2,013 — 3,663 
Residential junior lien/home equity77,016 49,273 1,499 2,584 1,683 4,396 511,026 647,477 
Pass77,016 49,273 1,499 2,517 1,683 4,263 508,675 644,926 
OAEM— — — — — 51 10 61 
Substandard— — — 67 — 82 2,341 2,490 
Multifamily140,004 90,868 60,699 39,848 19,914 78,483 1,335 431,151 
Pass140,004 90,868 60,699 39,848 19,914 77,945 1,335 430,613 
OAEM— — — — — 488 — 488 
Substandard— — — — — 50 — 50 
Nonowner occupied298,751 153,918 115,947 214,068 141,814 581,060 4,789 1,510,347 
Pass298,751 153,918 115,947 212,588 113,638 541,007 3,629 1,439,478 
OAEM— — — 1,480 20,349 26,207 1,001 49,037 
Substandard— — — — 7,827 13,846 159 21,832 
Owner occupied113,010 105,513 56,977 44,430 26,456 131,432 5,696 483,514 
Pass113,010 105,309 55,468 43,014 26,294 128,230 5,584 476,909 
OAEM— 182 745 791 92 923 33 2,766 
Substandard— 22 764 625 70 2,279 79 3,839 
Automobile and recreational vehicles613,513 330,298 172,530 68,996 20,589 4,525 — 1,210,451 
Pass613,513 330,252 172,435 68,865 20,524 4,501 — 1,210,090 
Substandard— 46 95 131 65 24 — 361 
Consumer credit cards— — — — — — 10,657 10,657 
Pass— — — — — — 10,657 10,657 
Consumer other6,561 17,177 2,489 3,798 1,656 4,085 40,781 76,547 
Pass6,561 17,177 2,489 3,775 1,652 4,085 40,720 76,459 
Substandard— — — 23 4 — 61 88 
Total loans and leases$1,952,670 $1,654,667 $919,032 $592,408 $365,940 $1,154,669 $1,002,757 $7,642,143 


30
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 months ended June 30, 2023 and 2022 were $9.8 million and 2021 were $2.7 million, and $7.2 million, respectively.
25
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, 20222023 and December 31, 2021.2022. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.
June 30, 2022 June 30, 2023
30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$121 $34 $699 $1,668 $2,522 $1,168,061 $1,170,583 Commercial, financial, agricultural and other$1,680 $433 $547 $17,030 $19,690 $1,482,304 $1,501,994 
Time and demandTime and demand14 30 613 1,668 2,325 1,029,605 1,031,930 Time and demand1,452 429 546 16,907 19,334 1,209,897 1,229,231 
Commercial credit cardsCommercial credit cards107 4 82 — 193 16,136 16,329 Commercial credit cards54 4 — — 58 13,061 13,119 
Equipment financeEquipment finance— — — — — 21,062 21,062 Equipment finance169 — — 123 292 153,860 154,152 
Time and demand otherTime and demand other— — 4 — 4 101,258 101,262 Time and demand other5 — 1 — 6 105,486 105,492 
Real estate constructionReal estate construction— — — — — 392,992 392,992 Real estate construction280 — — — 280 574,519 574,799 
Construction otherConstruction other— — — — — 292,400 292,400 Construction other280 — — — 280 474,440 474,720 
Construction residentialConstruction residential— — — — — 100,592 100,592 Construction residential— — — — — 100,079 100,079 
Residential real estateResidential real estate2,382 1,217 920 5,369 9,888 2,090,313 2,100,201 Residential real estate3,287 1,299 1,350 7,502 13,438 2,350,671 2,364,109 
Residential first lienResidential first lien1,503 661 447 2,721 5,332 1,454,529 1,459,861 Residential first lien1,973 876 827 3,548 7,224 1,687,520 1,694,744 
Residential junior lien/home equityResidential junior lien/home equity879 556 473 2,648 4,556 635,784 640,340 Residential junior lien/home equity1,314 423 523 3,954 6,214 663,151 669,365 
Commercial real estateCommercial real estate76 33 1,002 21,952 23,063 2,296,031 2,319,094 Commercial real estate4,525 154 — 23,009 27,688 2,977,274 3,004,962 
MultifamilyMultifamily76 — — — 76 360,259 360,335 Multifamily— — — 68 68 515,807 515,875 
Nonowner occupiedNonowner occupied— — 1,002 20,764 21,766 1,489,038 1,510,804 Nonowner occupied3,945 — — 20,649 24,594 1,790,770 1,815,364 
Owner occupiedOwner occupied— 33 — 1,188 1,221 446,734 447,955 Owner occupied580 154 — 2,292 3,026 670,697 673,723 
Loans to individualsLoans to individuals2,265 527 534 299 3,625 1,133,259 1,136,884 Loans to individuals3,396 639 577 468 5,080 1,348,892 1,353,972 
Automobile and recreational vehiclesAutomobile and recreational vehicles1,855 326 100 225 2,506 1,044,598 1,047,104 Automobile and recreational vehicles2,956 352 328 350 3,986 1,268,571 1,272,557 
Consumer credit cardsConsumer credit cards82 65 46 — 193 8,524 8,717 Consumer credit cards45 13 — — 58 9,885 9,943 
Consumer otherConsumer other328 136 388 74 926 80,137 81,063 Consumer other395 274 249 118 1,036 70,436 71,472 
Total loans and leasesTotal loans and leases$4,844 $1,811 $3,155 $29,288 $39,098 $7,080,656 $7,119,754 Total loans and leases$13,168 $2,525 $2,474 $48,009 $66,176 $8,733,660 $8,799,836 
2631
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 
December 31, 2021 December 31, 2022
30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$633 $987 $155 $2,006 $3,781 $1,169,671 $1,173,452 Commercial, financial, agricultural and other$1,233 $279 $355 $2,374 $4,241 $1,207,465 $1,211,706 
Time and demandTime and demand605 972 144 2,006 3,727 1,155,797 1,159,524 Time and demand1,121 270 352 2,374 4,117 1,019,707 1,023,824 
Commercial credit cardsCommercial credit cards28 15 11 — 54 13,874 13,928 Commercial credit cards27 9 — — 36 13,884 13,920 
Equipment financeEquipment finance— — — — — 79,674 79,674 
Time and demand otherTime and demand other85 — 3 — 88 94,200 94,288 
Real estate constructionReal estate construction813 — 448 45 1,306 493,150 494,456 Real estate construction502 — — — 502 512,599 513,101 
Construction otherConstruction other— — — — — 395,439 395,439 
Construction residentialConstruction residential502 — — — 502 117,160 117,662 
Residential real estateResidential real estate3,393 983 218 5,608 10,202 1,910,048 1,920,250 Residential real estate3,023 1,178 811 5,683 10,695 2,183,974 2,194,669 
Residential first lienResidential first lien1,934 354 51 2,706 5,045 1,294,489 1,299,534 Residential first lien1,547 771 214 3,369 5,901 1,541,291 1,547,192 
Residential junior lien/home equityResidential junior lien/home equity1,459 629 167 2,902 5,157 615,559 620,716 Residential junior lien/home equity1,476 407 597 2,314 4,794 642,683 647,477 
Commercial real estateCommercial real estate— 74 — 40,195 40,269 2,210,828 2,251,097 Commercial real estate7,870 25 93 20,539 28,527 2,396,485 2,425,012 
MultifamilyMultifamily— — — 15,097 15,097 370,335 385,432 Multifamily202 — — — 202 430,949 431,151 
Nonowner occupiedNonowner occupied— — — 23,930 23,930 1,441,317 1,465,247 Nonowner occupied7,547 — 92 19,575 27,214 1,483,133 1,510,347 
Owner occupiedOwner occupied— 74 — 1,168 1,242 399,176 400,418 Owner occupied121 25 1 964 1,111 482,403 483,514 
Loans to individualsLoans to individuals1,611 417 785 206 3,019 996,956 999,975 Loans to individuals3,268 571 732 449 5,020 1,292,635 1,297,655 
Automobile and recreational vehiclesAutomobile and recreational vehicles1,228 175 199 148 1,750 899,530 901,280 Automobile and recreational vehicles2,694 368 295 361 3,718 1,206,733 1,210,451 
Consumer credit cardsConsumer credit cards36 44 63 — 143 11,008 11,151 Consumer credit cards53 29 5 — 87 10,570 10,657 
Consumer otherConsumer other347 198 523 58 1,126 86,418 87,544 Consumer other521 174 432 88 1,215 75,332 76,547 
Total loans and leasesTotal loans and leases$6,450 $2,461 $1,606 $48,060 $58,577 $6,780,653 $6,839,230 Total loans and leases$15,896 $2,053 $1,991 $29,045 $48,985 $7,593,158 $7,642,143 
Nonaccrual Loans
The previous tables summarize nonaccrual loans by loan segment. The Company generally places loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain, when part of the principal balance has been charged off and no restructuring has occurred, or the loans reach a certain number of days past due. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
When a loan is placed on nonaccrual, the accrued unpaid interest receivable is reversed against interest income and all future payments received are applied as a reduction to the loan principal. Generally, the loan is returned to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer in doubt.
Nonperforming Loans
Management considers loans to be nonperforming when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. Nonperforming loans include nonaccrual loans and all troubled debt restructured loans. When management identifies a loan as nonperforming, the credit loss is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole source for repayment of the loan is the operation or liquidation of collateral. When the loan is collateral dependent, the appraised value less estimated cost to sell is utilized. If management determines that the value of the loan is less than the recorded investment in the loan, a credit loss is recognized through an allowance estimate or a charge-off to the allowance for credit losses.
When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of a nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.
2732
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.
At June 30, 20222023 and December 31, 2021,2022, there were no nonperforming loans held for sale. During both the six months ended June 30, 20222023 and 2021,2022, there were no gains recognized on the sale of nonperforming loans.
The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of June 30, 20222023 and December 31, 2021.2022. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position. The increase in nonperforming loans is primarily a result of $18.7 million in loans acquired from Centric, offset by the removal of $6.4 million in accruing troubled debt restructurings ("TDR's"). The TDR's were eliminated as a result of our adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). This standard was adopted on January 1, 2023 and eliminates the accounting guidance for TDR's while enhancing disclosure requirements for loan modifications for borrowers experiencing financial difficulty.
2833
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2022December 31, 2021 June 30, 2023December 31, 2022
Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance		 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
(dollars in thousands) (dollars in thousands)
With no related allowance recorded:With no related allowance recorded:With no related allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$3,653 $10,002 $3,720 $10,303 Commercial, financial, agricultural and other$1,878 $10,270 $3,141 $9,555 
Time and demandTime and demand3,653 10,002 3,720 10,303 Time and demand1,755 10,147 3,141 9,555 
Equipment financeEquipment finance— — Equipment finance123 123 — — 
Time and demand otherTime and demand other— — Time and demand other— — — — 
Real estate constructionReal estate construction— — 45 53 Real estate construction— — — — 
Construction otherConstruction other— — Construction other— — — — 
Construction residentialConstruction residential— — Construction residential— — — — 
Residential real estateResidential real estate8,638 10,527 9,365 11,294 Residential real estate6,266 8,071 9,145 11,010 
Residential first lienResidential first lien4,859 5,950 5,200 6,337 Residential first lien3,548 4,618 5,754 6,848 
Residential junior lien/home equityResidential junior lien/home equity3,779 4,577 4,165 4,957 Residential junior lien/home equity2,718 3,453 3,391 4,162 
Commercial real estateCommercial real estate16,510 16,752 40,591 41,525 Commercial real estate22,409 24,509 21,505 24,119 
MultifamilyMultifamily— — 14,677 14,677 Multifamily68 68 — — 
Nonowner occupiedNonowner occupied14,913 14,939 24,581 25,310 Nonowner occupied20,649 22,931 20,155 22,565 
Owner occupiedOwner occupied1,597 1,813 1,333 1,538 Owner occupied1,692 1,510 1,350 1,554 
Loans to individualsLoans to individuals438 484 446 485 Loans to individuals468 535 528 563 
Automobile and recreational vehiclesAutomobile and recreational vehicles364 405 388 422 Automobile and recreational vehicles350 418 440 475 
Consumer otherConsumer other74 79 58 63 Consumer other118 117 88 88 
SubtotalSubtotal29,239 37,765 54,167 63,660 Subtotal31,021 43,385 34,319 45,247 
With an allowance recorded:With an allowance recorded:With an allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other— — $— 327 349 $307 Commercial, financial, agricultural and other15,152 15,826 $12,404 1,168 1,186 $711 
Time and demandTime and demand— — — 327 349 307 Time and demand15,152 15,826 12,404 1,168 1,186 711 
Equipment financeEquipment finance— — — Equipment finance— — — — — — 
Time and demand otherTime and demand other— — — Time and demand other— — — — — — 
Real estate constructionReal estate construction— — — — — — Real estate construction— — — — — — 
Construction otherConstruction other— — — Construction other— — — — — — 
Construction residentialConstruction residential— — — Construction residential— — — — — — 
Residential real estateResidential real estate— — — — — — Residential real estate1,236 1,406 103 — — — 
Residential first lienResidential first lien— — — — — — Residential first lien— — — — — — 
Residential junior lien/home equityResidential junior lien/home equity— — — — — — Residential junior lien/home equity1,236 1,406 103 — — — 
Commercial real estateCommercial real estate6,453 7,263 360 686 711 88 Commercial real estate600 620 63 — — — 
MultifamilyMultifamily— — — 421 446 88 Multifamily— — — — — — 
Nonowner occupiedNonowner occupied6,453 7,263 360 — — — Nonowner occupied— — — — — — 
Owner occupiedOwner occupied— — — 265 265 — Owner occupied600 620 63 — — — 
Loans to individualsLoans to individuals— — — — — — Loans to individuals— — — — — — 
Automobile and recreational vehiclesAutomobile and recreational vehicles— — — — — — Automobile and recreational vehicles— — — — — — 
Consumer otherConsumer other— — — — — — Consumer other— — — — — — 
SubtotalSubtotal6,453 7,263 360 1,013 1,060 395 Subtotal16,988 17,852 12,570 1,168 1,186 711 
TotalTotal$35,692 $45,028 $360 $55,180 $64,720 $395 Total$48,009 $61,237 $12,570 $35,487 $46,433 $711 

2934
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, For the Six Months Ended June 30,
20222021 20232022
Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized		 Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized
(dollars in thousands) (dollars in thousands)
With no related allowance recorded:With no related allowance recorded:With no related allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$3,883 $50 $3,966 $43 Commercial, financial, agricultural and other$4,444 $(10)$3,883 $50 
Time and demandTime and demand3,883 50 3,966 43 Time and demand4,283 (10)3,883 50 
Equipment financeEquipment finance— — Equipment finance161 — — — 
Time and demand otherTime and demand other— — Time and demand other— — — — 
Real estate constructionReal estate construction— — 54 — Real estate construction— — — — 
Construction otherConstruction other— — Construction other— — — — 
Construction residentialConstruction residential— — Construction residential— — — — 
Residential real estateResidential real estate8,985 141 10,726 221 Residential real estate6,190 40 8,985 141 
Residential first lienResidential first lien5,080 105 5,822 176 Residential first lien3,510 40 5,080 105 
Residential junior lien/home equityResidential junior lien/home equity3,905 36 4,904 45 Residential junior lien/home equity2,680 — 3,905 36 
Commercial real estateCommercial real estate16,933 63 15,879 30 Commercial real estate22,769 (43)16,933 63 
MultifamilyMultifamily344 — — — Multifamily11 — 344 — 
Nonowner occupiedNonowner occupied14,986 52 13,079 10 Nonowner occupied20,565 4 14,986 52 
Owner occupiedOwner occupied1,603 11 2,800 20 Owner occupied2,193 (47)1,603 11 
Loans to individualsLoans to individuals432 8 477 6 Loans to individuals443 1 432 8 
Automobile and recreational vehiclesAutomobile and recreational vehicles361 8 426 6 Automobile and recreational vehicles355 1 361 8 
Consumer otherConsumer other71 — 51 — Consumer other88 — 71 — 
SubtotalSubtotal30,233 262 31,102 300 Subtotal33,846 (12)30,233 262 
With an allowance recorded:With an allowance recorded:With an allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other— — 6,813 36 Commercial, financial, agricultural and other8,056 — — — 
Time and demandTime and demand— — 6,813 36 Time and demand8,056 — — — 
Equipment financeEquipment finance— — Equipment finance— — — — 
Time and demand otherTime and demand other— — Time and demand other— — — — 
Real estate constructionReal estate construction— — — — Real estate construction— — — — 
Construction otherConstruction other— — Construction other— — — — 
Construction residentialConstruction residential— — Construction residential— — — — 
Residential real estateResidential real estate— — — — Residential real estate1,030 — — — 
Residential first lienResidential first lien— — — — Residential first lien— — — — 
Residential junior lien/home equityResidential junior lien/home equity— — — — Residential junior lien/home equity1,030 — — — 
Commercial real estateCommercial real estate7,024 — 14,730 — Commercial real estate100 — 7,024 — 
MultifamilyMultifamily— — 457 — Multifamily— — — — 
Nonowner occupiedNonowner occupied7,024 — 14,096 — Nonowner occupied— — 7,024 — 
Owner occupiedOwner occupied— — 177 — Owner occupied100 — — — 
Loans to individualsLoans to individuals— — — — Loans to individuals— — — — 
Automobile and recreational vehiclesAutomobile and recreational vehicles— — — — Automobile and recreational vehicles— — — — 
Consumer otherConsumer other— — — — Consumer other— — — — 
SubtotalSubtotal7,024 — 21,543 36 Subtotal9,186 — 7,024 — 
TotalTotal$37,257 $262 $52,645 $336 Total$43,032 $(12)$37,257 $262 
3035
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,For the Three Months Ended June 30,
2022202120232022
Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
Income
Recognized		Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
Income
Recognized
(dollars in thousands)(dollars in thousands)
With no related allowance recorded:With no related allowance recorded:With no related allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$3,822 $27 $5,591 $31 Commercial, financial, agricultural and other$4,416 $(10)$3,822 $27 
Time and demandTime and demand3,822 27 5,591 31 Time and demand4,332 (10)3,822 27 
Equipment financeEquipment finance— — Equipment finance84 — — — 
Time and demand otherTime and demand other— — Time and demand other— — — — 
Real estate constructionReal estate construction— — 54 — Real estate construction— — — — 
Construction otherConstruction other— — Construction other— — — — 
Construction residentialConstruction residential— — Construction residential— — — — 
Residential real estateResidential real estate8,769 57 10,560 159 Residential real estate6,312 19 8,769 57 
Residential first lienResidential first lien4,963 43 5,661 132 Residential first lien3,584 19 4,963 43 
Residential junior lien/home equityResidential junior lien/home equity3,806 14 4,899 27 Residential junior lien/home equity2,728 — 3,806 14 
Commercial real estateCommercial real estate16,676 49 13,689 7 Commercial real estate22,853 (43)16,676 49 
MultifamilyMultifamily273 — — — Multifamily23 — 273 — 
Nonowner occupiedNonowner occupied14,796 42 11,227 2 Nonowner occupied20,527 4 14,796 42 
Owner occupiedOwner occupied1,607 7 2,462 5 Owner occupied2,303 (47)1,607 7 
Loans to individualsLoans to individuals423 5 475 4 Loans to individuals454 1 423 5 
AutomobileAutomobile365 5 415 4 Automobile353 1 365 5 
Consumer otherConsumer other58 — 60 — Consumer other101 — 58 — 
SubtotalSubtotal29,690 138 30,369 201 Subtotal34,035 (33)29,690 138 
With an allowance recorded:With an allowance recorded:With an allowance recorded:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other— — 8,791 19 Commercial, financial, agricultural and other11,445 — — — 
Time and demandTime and demand— — 8,791 19 Time and demand11,445 — — — 
Equipment financeEquipment finance— — Equipment finance— — — — 
Time and demand otherTime and demand other— — Time and demand other— — — — 
Real estate constructionReal estate construction— — — — Real estate construction— — — — 
Construction otherConstruction other— — Construction other— — — — 
Construction residentialConstruction residential— — Construction residential— — — — 
Residential real estateResidential real estate— — — — Residential real estate1,237 — — — 
Residential first lienResidential first lien— — — — Residential first lien— — — — 
Residential junior lien/home equityResidential junior lien/home equity— — — — Residential junior lien/home equity1,237 — — — 
Commercial real estateCommercial real estate6,510 — 14,329 — Commercial real estate200 — 6,510 — 
MultifamilyMultifamily— — 450 — Multifamily— — — — 
Nonowner occupiedNonowner occupied6,510 — 13,614 — Nonowner occupied— — 6,510 — 
Owner occupiedOwner occupied— — 265 — Owner occupied200 — — — 
Loans to individualsLoans to individuals— — — — Loans to individuals— — — — 
AutomobileAutomobile— — — — Automobile— — — — 
Consumer otherConsumer other— — — — Consumer other— — — — 
SubtotalSubtotal6,510 — 23,120 19 Subtotal12,882 — 6,510 — 
TotalTotal$36,200 $138 $53,489 $220 Total$46,917 $(33)$36,200 $138 
Unfunded commitments related to nonperforming loans were $0.1 million and $0.2 million at both June 30, 20222023 and December 31, 2021.2022. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required for these commitments at June 30, 20222023 and December 31, 2021.2022.
3136
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Loan Modifications Made to Borrowers Experiencing Financial Difficulty
The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis. Disclosures for years prior to adoption continue to reflect TDR's as nonperforming loans and include TDR disclosures required under the previous guidance. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective loan segment and an allowance is determined by a loss given default and probability of default methodology.
Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal forgiveness, other- than-insignificant payment delay, term extensions or any combination thereof.
The following tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty:
For the Six Months Ended June 30, 2023
Rate ReductionTerm ExtensionPrincipal ForgivenessTerm Extension and Payment DeferralTotalPercentage of Total Loans and Leases
(dollars in thousands)
Residential real estate$24 $161 $— $244 $429 0.02 %
Residential first lien24 161 — 244 429 0.03 
Total$24 $161 $— $244 $429 — %
 For the Three Months Ended June 30, 2023
Rate ReductionTerm ExtensionPrincipal ForgivenessTerm Extension and Payment DeferralTotalPercentage of Total Loans and Leases
(dollars in thousands)
Residential real estate$— $161 $— $244 $405 — %
Residential first lien— 161 — 244 405 — 
Total$— $161 $— $244 $405 — %

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty:
For the Six Months Ended June 30, 2023
Rate ReductionTerm Extension (Years)Principal ForgivenessPayment Deferral (Years)
(dollars in thousands)
Residential real estate2.25 %3.1$— 0.5
Residential first lien2.25 3.1— 0.5
Total2.25 %3.1$— 0.5
For the Three Months Ended June 30, 2023
Rate ReductionTerm Extension (Years)Principal ForgivenessPayment Deferral (Years)
(dollars in thousands)
Residential real estate— %3.1$— 0.5
Residential first lien— 3.1— 0.5
Total— %3.1$— 0.5
37
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A modification is considered to be in default when the loan is 90 days or more past due. For the six months ended June 30, 2023, there were no modified loans that were considered to be in default. The following table shows the payment status of loans that have been modified on or after January 1, 2023, the date we adopted ASU 2022-02:
June 30, 2023
Current30 - 59 days past due60 - 89 days past due90 days or greater and still accruingTotal
(dollars in thousands)
Residential real estate$429 $— $— $— $429 
Residential first lien429 — — — 429 
Total loans and leases$429 $— $— $— $429 
Troubled Debt Restructurings Disclosures Prior to Adoption of ASU 2022-02
Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternative financing sources. Troubled debt restructured loans are considered to be nonperforming loans.
The following table provides detail as to the total troubled debt restructured loans and total commitments outstanding on troubled debt restructured loans:
June 30, 2022December 31, 2021
 (dollars in thousands)
Troubled debt restructured loans
Accrual status$6,404 $7,120 
Nonaccrual status9,694 13,134 
Total$16,098 $20,254 
Commitments
Letters of credit$60 $60 
Unused lines of credit20 16 
Total$80 $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, 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 estate2 $— $10 $59 $69 $68 $— 
Residential first lien2 — 10 59 69 68 — 
Total2 $— $10 $59 $69 $68 $— 

 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 other3 $6,373 $— $6,596 $12,969 $10,167 $1,091 
Time and demand3 6,373 — 6,596 12,969 10,167 1,091 
Residential real estate7 — 105 186 291 287 — 
Residential first lien6 — 105 172 277 274 — 
Residential junior lien/home equity1 — — 14 14 13 — 
Loans to individuals4 — 93 — 93 85 — 
Automobile and recreational vehicles4 — 93 — 93 85 — 
Total14 $6,373 $198 $6,782 $13,353 $10,539 $1,091 
32
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 months ended June 30, 2022, and 2021, $10 thousand and $169 thousand, respectively, of totalin rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For both 2022 and 2021, theThe changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.
For the three months ended June 30, 2022, there were no loans identified as troubled debt restructurings.
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 detail, including specific reserves and reasons for modification,information related to loans identified as troubled debt restructurings forthat were restructured within the past twelve months and that were considered to be in default during the six months ended June 30, 2022.
 2022
 Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Loans to individuals1 $16 
Automobile and recreational vehicles1 16 
Total1 $16 
For the three months ended June 30, 2021.2022, there were no loans restructured within the past twelve months that were considered to be in default.

38
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide detail related to the allowance for credit losses:
 For the Six Months Ended June 30, 2023
Beginning balanceAllowance for credit loss on PCD acquired loansCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other$22,650 $19,417 $(7,340)$254 $6,733 $41,714 
Time and demand20,040 19,417 (6,470)168 4,718 37,873 
Commercial credit cards335 — (35)7 13 320 
Equipment finance1,086 — (45)— 1,033 2,074 
Time and demand other1,189 — (790)79 969 1,447 
Real estate construction8,822 287 — — (1,381)7,728 
Construction other6,360 227 — — (442)6,145 
Construction residential2,462 60 — — (939)1,583 
Residential real estate21,412 527 (80)71 1,810 23,740 
Residential first lien14,822 197 (17)43 1,518 16,563 
Residential junior lien/home equity6,590 330 (63)28 292 7,177 
Commercial real estate28,804 6,971 (1,517)136 4,533 38,927 
Multifamily4,726 234 — — 815 5,775 
Nonowner occupied16,426 2,739 — 124 2,421 21,710 
Owner occupied7,652 3,998 (1,517)12 1,297 11,442 
Loans to individuals21,218 3 (2,289)927 1,578 21,437 
Automobile and recreational vehicles18,819 3 (1,586)702 1,320 19,258 
Consumer credit cards412 — (146)47 62 375 
Consumer other1,987 — (557)178 196 1,804 
Total loans and leases$102,906 $27,205 $(11,226)$1,388 $13,273 $133,546 
a) The provision expense (credit) shown here includes the day 1 provision on non-PCD loans acquired from Centric and excludes the provision for off-balance sheet credit exposure included in the income statement.
39
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three Months Ended June 30, 2021
 Type of Modification    For the Six Months Ended June 30, 2022
Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve		 Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other1 $— $— $6,596 $6,596 $3,916 $— Commercial, financial, agricultural and other$18,093 $(984)$159 $4,721 $21,989 
Time and demandTime and demand1 — — 6,596 6,596 3,916 — Time and demand15,283 (283)78 4,843 19,921 
Commercial credit cardsCommercial credit cards247 (77)26 191 387 
Equipment financeEquipment finance— — — 272 272 
Time and demand otherTime and demand other2,563 (624)55 (585)1,409 
Real estate constructionReal estate construction4,220 — — 1,309 5,529 
Construction otherConstruction other3,278 — — 322 3,600 
Construction residentialConstruction residential942 — — 987 1,929 
Residential real estateResidential real estate4 — — 172 172 169 — Residential real estate12,625 (144)60 5,206 17,747 
Residential first lienResidential first lien4 — — 172 172 169 — Residential first lien7,459 (45)45 4,401 11,860 
Residential junior lien/home equityResidential junior lien/home equity5,166 (99)15 805 5,887 
Commercial real estateCommercial real estate33,376 (552)19 (1,456)31,387 
MultifamilyMultifamily3,561 (411)— 405 3,555 
Nonowner occupiedNonowner occupied24,838 (141)10 (3,754)20,953 
Owner occupiedOwner occupied4,977 — 9 1,893 6,879 
Loans to individualsLoans to individuals2 — 29 — 29 29 — Loans to individuals24,208 (2,049)829 (6,037)16,951 
Automobile and recreational vehiclesAutomobile and recreational vehicles2 — 29 — 29 29 — Automobile and recreational vehicles21,392 (977)543 (6,395)14,563 
Total7 $— $29 $6,768 $6,797 $4,114 $— 
Consumer credit cardsConsumer credit cards496 (233)38 11 312 
Consumer otherConsumer other2,320 (839)248 347 2,076 
Total loans and leasesTotal loans and leases$92,522 $(3,729)$1,067 $3,743 $93,603 
a) The troubled debt restructuringsprovision expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the three months ended June 30, 2021, $169 thousand of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For three months ended June 30, 2022, there were no similar modifications. For modifications made in 2021, the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.income statement.
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:
 20222021
 Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Loans to individuals1 $16 — $— 
Automobile and recreational vehicles1 16 — — 
Total1 $16 — $— 
For the three months ended June 30, 2022 and 2021, there were no loans restructured within the past twelve months that were considered to be in default.
3340
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide detail related to the allowance for credit losses:
For the Six Months Ended June 30, 2022For the Three Months Ended June 30, 2023
Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balanceBeginning balanceAllowance for credit loss on PCD acquired loansCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)(dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$18,093 $(984)$159 $4,721 $21,989 Commercial, financial, agricultural and other$42,568 $3,468 $(6,677)$95 $2,260 $41,714 
Time and demandTime and demand15,283 (283)78 4,843 19,921 Time and demand39,465 3,468 (6,215)52 1,103 37,873 
Commercial credit cardsCommercial credit cards247 (77)26 191 387 Commercial credit cards331 — (9)5 (7)320 
Equipment financeEquipment finance— — — 272 272 Equipment finance1,461 — — — 613 2,074 
Time and demand otherTime and demand other2,563 (624)55 (585)1,409 Time and demand other1,311 — (453)38 551 1,447 
Real estate constructionReal estate construction4,220 — — 1,309 5,529 Real estate construction7,949 — — — (221)7,728 
Construction otherConstruction other3,278 — — 322 3,600 Construction other5,891 — — — 254 6,145 
Construction residentialConstruction residential942 — — 987 1,929 Construction residential2,058 — — — (475)1,583 
Residential real estateResidential real estate12,625 (144)60 5,206 17,747 Residential real estate22,773 — (1)33 935 23,740 
Residential first lienResidential first lien7,459 (45)45 4,401 11,860 Residential first lien15,824 — (1)17 723 16,563 
Residential junior lien/home equityResidential junior lien/home equity5,166 (99)15 805 5,887 Residential junior lien/home equity6,949 — — 16 212 7,177 
Commercial real estateCommercial real estate33,376 (552)19 (1,456)31,387 Commercial real estate39,377 1,658 (1,517)94 (685)38,927 
MultifamilyMultifamily3,561 (411)— 405 3,555 Multifamily5,541 — — — 234 5,775 
Nonowner occupiedNonowner occupied24,838 (141)10 (3,754)20,953 Nonowner occupied21,552 — — 86 72 21,710 
Owner occupiedOwner occupied4,977 — 9 1,893 6,879 Owner occupied12,284 1,658 (1,517)8 (991)11,442 
Loans to individualsLoans to individuals24,208 (2,049)829 (6,037)16,951 Loans to individuals21,218 — (1,148)456 911 21,437 
Automobile and recreational vehiclesAutomobile and recreational vehicles21,392 (977)543 (6,395)14,563 Automobile and recreational vehicles19,013 — (784)312 717 19,258 
Consumer credit cardsConsumer credit cards496 (233)38 11 312 Consumer credit cards368 — (80)30 57 375 
Consumer otherConsumer other2,320 (839)248 347 2,076 Consumer other1,837 — (284)114 137 1,804 
Total loans and leasesTotal loans and leases$92,522 $(3,729)$1,067 $3,743 $93,603 Total loans and leases$133,885 $5,126 $(9,343)$678 $3,200 $133,546 
a) The provision expense(credit)expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

3441
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, 2022
Loans
Ending balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit lossesEnding balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other$21,989 $— $21,989 $1,170,583 $2,582 $1,168,001 
Time and demand19,921 — 19,921 1,031,930 2,582 1,029,348 
Commercial credit cards387 — 387 16,329 — 16,329 
Equipment finance272 — 272 21,062 — 21,062 
Time and demand other1,409 — 1,409 101,262 — 101,262 
Real estate construction5,529 — 5,529 392,992 — 392,992 
Construction other3,600 — 3,600 292,400 — 292,400 
Construction residential1,929 — 1,929 100,592 — 100,592 
Residential real estate17,747 — 17,747 2,100,201 253 2,099,948 
Residential first lien11,860 — 11,860 1,459,861 — 1,459,861 
Residential junior lien/home equity5,887 — 5,887 640,340 253 640,087 
Commercial real estate31,387 360 31,027 2,319,094 21,960 2,297,134 
Multifamily3,555 — 3,555 360,335 — 360,335 
Nonowner occupied20,953 360 20,593 1,510,804 21,044 1,489,760 
Owner occupied6,879 — 6,879 447,955 916 447,039 
Loans to individuals16,951 — 16,951 1,136,884 — 1,136,884 
Automobile and recreational vehicles14,563 — 14,563 1,047,104 — 1,047,104 
Consumer credit cards312 — 312 8,717 — 8,717 
Consumer other2,076 — 2,076 81,063 — 81,063 
Total loans and leases$93,603 $360 $93,243 $7,119,754 $24,795 $7,094,959 

35
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 For the Three Months Ended June 30, 2022
Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$17,187 $(4,456)$193 $8,542 $21,466 Commercial, financial, agricultural and other$20,721 $(509)$79 $1,698 $21,989 
Time and demandTime and demand16,838 (4,338)188 8,410 21,098 Time and demand18,907 (139)25 1,128 19,921 
Commercial credit cardsCommercial credit cards349 (118)5 132 368 Commercial credit cards342 (58)25 78 387 
Equipment financeEquipment finance31 — — 241 272 
Time and demand otherTime and demand other1,441 (312)29 251 1,409 
Real estate constructionReal estate construction7,966 — 135 (3,816)4,285 Real estate construction4,930 — — 599 5,529 
Construction otherConstruction other3,175 — — 425 3,600 
Construction residentialConstruction residential1,755 — — 174 1,929 
Residential real estateResidential real estate14,358 (119)211 (1,517)12,933 Residential real estate16,728 (5)31 993 17,747 
Residential first lienResidential first lien7,919 (36)182 (671)7,394 Residential first lien11,125 (5)22 718 11,860 
Residential junior lien/home equityResidential junior lien/home equity6,439 (83)29 (846)5,539 Residential junior lien/home equity5,603 — 9 275 5,887 
Commercial real estateCommercial real estate41,953 (1,557)40 (4,641)35,795 Commercial real estate33,704 (552)5 (1,770)31,387 
MultifamilyMultifamily6,240 (1)— (1,860)4,379 Multifamily3,610 (411)— 356 3,555 
Nonowner occupiedNonowner occupied28,414 (1,556)40 13 26,911 Nonowner occupied23,267 (141)5 (2,178)20,953 
Owner occupiedOwner occupied7,299 — — (2,794)4,505 Owner occupied6,827 — — 52 6,879 
Loans to individualsLoans to individuals19,845 (2,472)828 4,358 22,559 Loans to individuals15,105 (1,040)463 2,423 16,951 
Automobile and recreational vehiclesAutomobile and recreational vehicles16,133 (1,068)575 3,658 19,298 Automobile and recreational vehicles12,635 (425)288 2,065 14,563 
Consumer credit cardsConsumer credit cards635 (247)42 98 528 Consumer credit cards382 (124)14 40 312 
Consumer otherConsumer other3,077 (1,157)211 602 2,733 Consumer other2,088 (491)161 318 2,076 
Total loans and leasesTotal loans and leases$101,309 $(8,604)$1,407 $2,926 $97,038 Total loans and leases$91,188 $(2,106)$578 $3,943 $93,603 
a) The provision expense(credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.
For the Six Months Ended June 30, 2021
Loans
Ending balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit lossesEnding balanceEnding balance: individually evaluated for credit lossesEnding balance: collectively evaluated for credit losses
(dollars in thousands)
Commercial, financial, agricultural and other$21,466 $2,358 $19,108 $1,374,177 $13,688 $1,360,489 
Time and demand21,098 2,358 18,740 1,360,065 13,688 1,346,377 
Commercial credit cards368 — 368 14,112 — 14,112 
Real estate construction4,285 — 4,285 414,816 — 414,816 
Residential real estate12,933 — 12,933 1,828,783 541 1,828,242 
Residential first lien7,394 — 7,394 1,218,300 — 1,218,300 
Residential junior lien/home equity5,539 — 5,539 610,483 541 609,942 
Commercial real estate35,795 588 35,207 2,205,758 27,099 2,178,659 
Multifamily4,379 113 4,266 385,905 445 385,460 
Nonowner occupied26,911 475 26,436 1,429,192 24,624 1,404,568 
Owner occupied4,505 — 4,505 390,661 2,030 388,631 
Loans to individuals22,559 — 22,559 917,001 — 917,001 
Automobile and recreational vehicles19,298 — 19,298 829,150 — 829,150 
Consumer credit cards528 — 528 10,834 — 10,834 
Consumer other2,733 — 2,733 77,017 — 77,017 
Total loans and leases$97,038 $2,946 $94,092 $6,740,535 $41,328 $6,699,207 
36
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three Months Ended June 30, 2022
Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other$20,721 $(509)$79 $1,698 $21,989 
Time and demand18,907 (139)25 1,128 19,921 
Commercial credit cards342 (58)25 78 387 
Equipment finance31 — — 241 272 
Time and demand other1,441 (312)29 251 1,409 
Real estate construction4,930 — — 599 5,529 
Construction other3,175 — — 425 3,600 
Construction residential1,755 — — 174 1,929 
Residential real estate16,728 0(5)31 993 17,747 
Residential first lien11,125 (5)22 718 11,860 
Residential junior lien/home equity5,603 — 9 275 5,887 
Commercial real estate33,704 (552)5 (1,770)31,387 
Multifamily3,610 (411)— 356 3,555 
Nonowner occupied23,267 (141)5 (2,178)20,953 
Owner occupied6,827 — — 52 6,879 
Loans to individuals15,105 (1,040)463 2,423 16,951 
Automobile and recreational vehicles12,635 (425)288 2,065 14,563 
Consumer credit cards382 (124)14 40 312 
Consumer other2,088 (491)161 318 2,076 
Total loans and leases$91,188 $(2,106)$578 $3,943 $93,603 
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, 2021
 Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
 (dollars in thousands)
Commercial, financial, agricultural and other$21,801 $(3,887)$103 $3,449 $21,466 
Time and demand21,427 (3,878)99 3,450 21,098 
Commercial credit cards374 (9)4 (1)368 
Real estate construction4,021 — 135 129 4,285 
Residential real estate12,829 — (14)174 (56)12,933 
Residential first lien7,227 (13)159 21 7,394 
Residential junior lien/home equity5,602 (1)15 (77)5,539 
Commercial real estate37,668 (7)1 (1,867)35,795 
Multifamily4,251 — — 128 4,379 
Nonowner occupied27,889 (7)1 (972)26,911 
Owner occupied5,528 — — — (1,023)4,505 
Loans to individuals20,444 (931)499 2,547 22,559 
Automobile and recreational vehicles16,888 (388)394 2,404 19,298 
Consumer credit cards689 (79)25 (107)528 
Consumer other2,867 (464)80 250 2,733 
Total loans and leases$96,763 $(4,839)$912 $4,202 $97,038 
a) The provision expense(credit)expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

37
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 89 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 leasesleases; (ii) to not reassess the lease classification for any expired or existing leaselease; (iii) to account for lease and non-lease components separatelyseparately; and (iv) to not reassess initial direct costs for any existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, including certain branch and ATM locations and office space. First Commonwealth has no material leasing arrangements for which it is the lessor of property or equipment.
42
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, 2022December 31, 2021June 30, 2023December 31, 2022
Balance sheet:Balance sheet:Balance sheet:
Operating lease asset classified as premises and equipmentOperating lease asset classified as premises and equipment$41,606 $40,550 Operating lease asset classified as premises and equipment$46,658 $40,747 
Operating lease liability classified as other liabilitiesOperating lease liability classified as other liabilities45,978 44,801 Operating lease liability classified as other liabilities51,080 45,149 
For the Three Months EndedFor the Six Months EndedFor the Three Months EndedFor the Six Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Income statement:Income statement:Income statement:
Operating lease cost classified as occupancy and equipment expense Operating lease cost classified as occupancy and equipment expense$1,252 $1,200 $2,468 $2,401  Operating lease cost classified as occupancy and equipment expense$1,550 $1,252 $3,044 $2,468 
Weighted average lease term, in yearsWeighted average lease term, in years14.1314.69Weighted average lease term, in years13.5214.13
Weighted average discount rateWeighted average discount rate3.24 %3.41 %Weighted average discount rate3.50 %3.24 %
Operating cash flowsOperating cash flows$1,183 $1,193 Operating cash flows$1,573 $1,183 
In the above table, the increase in the ROU asset and lease liability at June 30, 2023 compared to December 31, 2022, is primarily a result of leases assumed as part of the Centric acquisition.
The ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. First Commonwealth's lease agreements often include one or more options to renew at the Company's discretion. If we consider the renewal option to be reasonably certain, we include the extended term in the calculation of the ROU asset and lease liability.
First Commonwealth uses incremental borrowing rates when calculating the lease liability because the rate implicit in the lease is not readily determinable. The incremental borrowing rate used by First Commonwealth is an amortizing loan rate obtained from the Federal Home Loan Bank ("FHLB") of Pittsburgh. This rate is consistent with a collateralized borrowing rate and is available for terms similar to the lease payment schedules.
Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 20222023 were as follows (dollars in thousands):
For the twelve months ended:
June 30, 20232024$4,987 
June 30, 20244,8563,115 
June 30, 20254,7715,675 
June 30, 20264,3425,473 
June 30, 20274,0515,043 
June 30, 20284,786 
Thereafter35,89241,362 
Total future minimum lease payments58,89965,454 
Less remaining imputed interest12,92114,374 
Operating lease liability$45,97851,080 

38
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 910 Income Taxes
In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” at June 30, 20222023 and December 31, 2021,2022, First Commonwealth had no material unrecognized tax benefits or accrued interest and penalties. If applicable, First Commonwealth will record interest and penalties as a component of noninterest expense.
First Commonwealth is subject to routine audits of our tax returns by the Internal Revenue Service (“IRS”) as well as all states in which we conduct business. Generally, tax years prior to the year ended December 31, 20182019 are no longer open to examination by federal and state taxing authorities.
43
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1011 Fair Values of Assets and Liabilities
FASB ASC Topic 820, “Fair Value Measurements and Disclosures” ("Topic 820"), requires disclosures for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). All non-financial assets are included either as a separate line item on the unaudited Consolidated Statements of Financial Condition or in the “Other assets” category of the unaudited Consolidated Statements of Financial Condition. Currently, First Commonwealth does not have any non-financial liabilities to disclose.
FASB ASC Topic 825, “Financial Instruments” (Topic("Topic 825"), permits entities to irrevocably elect to measure select financial instruments and certain other items at fair value. The unrealized gains and losses are required to be included in earnings each reporting period for the items that fair value measurement is elected. First Commonwealth has elected not to measure any existing financial instruments at fair value under Topic 825; however, in the future we may elect to adopt this guidance for select financial instruments.
 
In accordance with Topic 820, First Commonwealth groups financial assets and financial liabilities measured at fair value in three levels based on the principal markets in which the assets and liabilities are transacted and the observability of the data points used to determine fair value. These levels are:
•Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange (“NYSE”). Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
•Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained for observable inputs for identical or comparable assets or liabilities from alternative pricing sources with reasonable levels of price transparency. Level 2 includes Obligations of U.S. Government securities issued by Agencies and Sponsored Enterprises, Obligations of States and Political Subdivisions, corporate securities, FHLB stock, loans held for sale, premise held for sale, interest rate derivatives (including interest rate caps, interest rate collars, interest rate swaps and risk participation agreements), certain other real estate owned and certain nonperforming loans.
Level 2 investment securities are valued by a recognized third party pricing service using observable inputs. The model used by the pricing service varies by asset class and incorporates available market, trade and bid information as well as cash flow information when applicable. Because many fixed-income investment securities do not trade on a daily basis, the model uses available information such as benchmark yield curves, benchmarking of like investment securities, sector groupings and matrix pricing. The model will also use processes such as an option-adjusted spread to assess the impact of interest rates and to develop prepayment estimates. Market inputs normally used in the pricing model include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.
Management validates the market values provided by the third party service by having another source price 100% of the securities on a monthly basis, monthly monitoring of variances from prior period pricing and, on a monthly basis, evaluating pricing changes compared to expectations based on changes in the financial markets.
Other investments recorded in the unaudited Consolidated Statements of Financial Condition are primarily comprised of FHLB stock whose estimated fair value is based on its par value. Additional information on FHLB stock is provided in Note 6,7, “Investment Securities.”
Loans held for sale include residential mortgage loans originated for sale in the secondary mortgage market. The estimated fair value for these loans was determined on the basis of rates obtained in the respective secondary market. Loans held for sale could also include the Small Business Administration guaranteed portion of small business loans. The estimated fair value of
39
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

these loans is based on the contract with the third party investor. When loans held for sale include other commercial loans, fair value is determined using an executed trade or market bid obtained from potential buyers.
Interest rate derivatives are reported at an estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities, and consist of interest rate swaps where there is no significant deterioration in the counterparties' and/or loan customers' credit risk since origination of the interest rate swap as well as interest rate caps, interest rate collars and risk participation agreements. First Commonwealth values its interest rate swap and cap positions using a yield curve by taking market prices/rates for an appropriate set of instruments. The set of instruments currently used to determine the U.S. Dollar yield curve includes cash LIBOR rates from overnight to one year, Eurodollar futures contracts and swap rates from one year to thirty
44
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

years. These yield curves determine the valuations of interest rate swaps. Interest rate derivatives are further described in Note 11,12, “Derivatives.”
For purposes of potential valuation adjustments to our derivative positions, First Commonwealth evaluates the credit risk of its counterparties as well as our own credit risk. Accordingly, we have considered factors such as the likelihood of default, expected loss given default, net exposures and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. We review our counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure.
Interest rate derivatives also include interest rate forwards entered 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, at times the Company hedges foreign currency risk through the use of foreign exchange forward contracts. The fair value of foreign exchange forward contracts is based on the differential between the contract price and the market-based forward rate.
The estimated fair value for other real estate owned included in Level 2 is determined by either an independent market-based appraisal less estimated costs to sell or an executed sales agreement.
•Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker traded transactions. If the inputs used to provide the valuation are unobservable and/or there is very little, if any, market activity for the security or similar securities, the securities would be considered Level 3 securities. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The assets included in Level 3 are non-marketable equity investments, certain interest rate derivatives and certain nonperforming loans.
The estimated fair value of other investments included in Level 3 is based on carrying value as these securities do not have a readily determinable fair value.
The estimated fair value of limited partnership investments included in Level 3 is based on par value.
For interest rate derivatives included in Level 3, the fair value incorporates credit risk by considering such factors as likelihood of default and expected loss given default based on the credit quality of the underlying counterparties (loan customers).
4045
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with ASU No. 2011-4,2011-04, the following table provides information related to quantitative inputs and assumptions used in Level 3 fair value measurements.
Fair Value (dollars
in thousands)		Valuation
Technique		Unobservable InputsRange /
(weighted average)		Fair Value (dollars
in thousands)		Valuation
Technique		Unobservable InputsRange /
(weighted average)
June 30, 2022
June 30, 2023June 30, 2023
Other InvestmentsOther Investments$1,170 Carrying ValueN/AN/AOther Investments$6,182 Carrying ValueN/AN/A
Nonperforming LoansNonperforming Loans498  (a)Gas Reserve StudyDiscount rate10.00%Nonperforming Loans266  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$3.00 - $3.00 (b)Gas per MMBTU$3.00 - $3.00 (b)
Oil per BBL/d$80.00 - $80.00 (b)Oil per BBL/d$80.00 - $80.00 (b)
Limited Partnership InvestmentsLimited Partnership Investments16,613 Par ValueN/AN/ALimited Partnership Investments25,011 Par ValueN/AN/A
December 31, 2021
December 31, 2022December 31, 2022
Other InvestmentsOther Investments$1,170 Carrying ValueN/AN/AOther Investments$1,170 Carrying ValueN/AN/A
Nonperforming LoansNonperforming Loans598  (a)Gas Reserve StudyDiscount rate10.00%Nonperforming Loans363  (a)Gas Reserve StudyDiscount rate10.00%
Gas per MMBTU$2.00 - $2.00 (b)Gas per MMBTU$3.00 - $3.00 (b)
Oil per BBL/d$50.00 - $50.00 (b)Oil per BBL/d$80.00 - $80.00 (b)
Limited Partnership InvestmentsLimited Partnership Investments14,981 Par ValueN/AN/ALimited Partnership Investments17,691 Par ValueN/AN/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, 2022 June 30, 2023
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential$— $4,694 $— $4,694 Mortgage-Backed Securities - Residential$— $3,707 $— $3,707 
Mortgage-Backed Securities - CommercialMortgage-Backed Securities - Commercial— 308,870 — 308,870 Mortgage-Backed Securities - Commercial— 279,652 — 279,652 
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential— 509,530 — 509,530 Mortgage-Backed Securities - Residential— 419,222 — 419,222 
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises— 919 — 919 Other Government-Sponsored Enterprises— 883 — 883 
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions— 8,591 — 8,591 Obligations of States and Political Subdivisions— 8,014 — 8,014 
Corporate SecuritiesCorporate Securities— 31,018 — 31,018 Corporate Securities— 26,631 — 26,631 
Total Securities Available for SaleTotal Securities Available for Sale— 863,622 — 863,622 Total Securities Available for Sale— 738,109 — 738,109 
Other InvestmentsOther Investments— 12,495 1,170 13,665 Other Investments— 40,212 6,182 46,394 
Loans Held for SaleLoans Held for Sale— 12,876 — 12,876 Loans Held for Sale— 16,300 — 16,300 
Other Assets(a)
Other Assets(a)
— 25,984 16,613 42,597 
Other Assets(a)
— 50,805 25,011 75,816 
Total AssetsTotal Assets$— $914,977 $17,783 $932,760 Total Assets$— $845,426 $31,193 $876,619 
Other Liabilities(a)
Other Liabilities(a)
$— $55,435 $— $55,435 
Other Liabilities(a)
$— $87,018 $— $87,018 
Total LiabilitiesTotal Liabilities$— $55,435 $— $55,435 Total Liabilities$— $87,018 $— $87,018 
(a)Hedging and non-hedging interest rate derivatives and limited partnership investments
4146
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2022
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential$— $5,662 $— $5,662 Mortgage-Backed Securities - Residential$— $3,983 $— $3,983 
Mortgage-Backed Securities - CommercialMortgage-Backed Securities - Commercial— 362,290 — 362,290 Mortgage-Backed Securities - Commercial— 271,416 — 271,416 
Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - ResidentialMortgage-Backed Securities - Residential— 629,974 — 629,974 Mortgage-Backed Securities - Residential— 448,989 — 448,989 
Other Government-Sponsored EnterprisesOther Government-Sponsored Enterprises— 981 — 981 Other Government-Sponsored Enterprises— 882 — 882 
Obligations of States and Political SubdivisionsObligations of States and Political Subdivisions— 9,524 — 9,524 Obligations of States and Political Subdivisions— 8,187 — 8,187 
Corporate SecuritiesCorporate Securities— 32,949 — 32,949 Corporate Securities— 29,204 — 29,204 
Total Securities Available for SaleTotal Securities Available for Sale— 1,041,380 — 1,041,380 Total Securities Available for Sale— 762,661 — 762,661 
Other InvestmentsOther Investments— 11,668 1,170 12,838 Other Investments— 25,244 1,170 26,414 
Loans Held for SaleLoans Held for Sale— 18,583 — 18,583 Loans Held for Sale— 11,869 — 11,869 
Other Assets(a)
Other Assets(a)
— 26,805 14,981 41,786 
Other Assets(a)
— 50,738 17,691 68,429 
Total AssetsTotal Assets$— $1,098,436 $16,151 $1,114,587 Total Assets$— $850,512 $18,861 $869,373 
Other Liabilities(a)
Other Liabilities(a)
$— $34,263 $— $34,263 
Other Liabilities(a)
$— $89,298 $— $89,298 
Total LiabilitiesTotal Liabilities$— $34,263 $— $34,263 Total Liabilities$— $89,298 $— $89,298 
(a)Hedging and non-hedging interest rate derivatives and limited partnership investments
For the six months ended June 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
2022 2023
Other InvestmentsOther
Assets		Total Other InvestmentsOther
Assets		Total
(dollars in thousands) (dollars in thousands)
Balance, beginning of periodBalance, beginning of period$1,170 $14,981 $16,151 Balance, beginning of period$1,170 $17,691 $18,861 
Total gains or lossesTotal gains or lossesTotal gains or losses
Included in earningsIncluded in earnings— — — Included in earnings— — — 
Included in other comprehensive incomeIncluded in other comprehensive income— — — Included in other comprehensive income— — — 
Purchases, issuances, sales and settlementsPurchases, issuances, sales and settlementsPurchases, issuances, sales and settlements
PurchasesPurchases— 1,783 1,783 Purchases5,000 7,617 12,617 
IssuancesIssuances— — — Issuances— — — 
SalesSales— — — Sales— — — 
SettlementsSettlements— (151)(151)Settlements— (354)(354)
Transfers from Level 3Transfers from Level 3— — — Transfers from Level 3— — — 
Transfers into Level 3Transfers into Level 3— — — Transfers into Level 312 57 69 
Balance, end of periodBalance, end of period$1,170 $16,613 $17,783 Balance, end of period$6,182 $25,011 $31,193 

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


 
2021 2022
Other InvestmentsOther
Assets		Total Other InvestmentsOther
Assets		Total
(dollars in thousands) (dollars in thousands)
Balance, beginning of periodBalance, beginning of period$1,670 $6,620 $8,290 Balance, beginning of period$1,170 $14,981 $16,151 
Total gains or lossesTotal gains or lossesTotal gains or losses
Included in earningsIncluded in earnings— — — Included in earnings— — — 
Included in other comprehensive incomeIncluded in other comprehensive income— — — Included in other comprehensive income— — — 
Purchases, issuances, sales and settlementsPurchases, issuances, sales and settlementsPurchases, issuances, sales and settlements
PurchasesPurchases— 919 919 Purchases— 1,783 1,783 
IssuancesIssuances— — — Issuances— — — 
SalesSales— — — Sales— — — 
SettlementsSettlements— (91)(91)Settlements— (151)(151)
Transfers from Level 3Transfers from Level 3— — — Transfers from Level 3— — — 
Transfers into Level 3Transfers into Level 3— — — Transfers into Level 3— — — 
Balance, end of periodBalance, end of period$1,670 $7,448 $9,118 Balance, end of period$1,170 $16,613 $17,783 
During the six months ended June 30, 2023 and 2022, there were no transfers between fair value Levels 1, 2 or 3, however, $12 thousand in other investments and 2021,$57 thousand in other assets were transferred into Level 3 for the six months ended June 30, 2023 as a result of assets acquired in the Centric acquisition. 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, 2023 and 2022.
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:
 2023
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$6,182 $24,486 $30,668 
Total gains or losses
Included in earnings— — — 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements
Purchases— 728 728 
Issuances— — — 
Sales— — — 
Settlements— (203)(203)
Transfers from Level 3— — — 
Transfers into Level 3— — — 
Balance, end of period$6,182 $25,011 $31,193 
48
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 2022
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,170 $15,999 $17,169 
Total gains or losses
Included in earnings— — — 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements
Purchases— 740 740 
Issuances— — — 
Sales— — — 
Settlements— (126)(126)
Transfers from Level 3— — — 
Transfers into Level 3— — — 
Balance, end of period$1,170 $16,613 $17,783 
During the three months ended June 30, 2023 and 2022, 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, 20222023 and 2021.
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:
 2022
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,170 $15,999 $17,169 
Total gains or losses
Included in earnings— — — 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements
Purchases— 740 740 
Issuances— — — 
Sales— — — 
Settlements— (126)(126)
Transfers from Level 3— — — 
Transfers into Level 3— — — 
Balance, end of period$1,170 $16,613 $17,783 
43
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 2021
 Other InvestmentsOther
Assets		Total
 (dollars in thousands)
Balance, beginning of period$1,670 $7,010 $8,680 
Total gains or losses
Included in earnings— — — 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements
Purchases— 529 529 
Issuances— — — 
Sales— — — 
Settlements— (91)(91)
Transfers from Level 3— — — 
Transfers into Level 3— — — 
Balance, end of period$1,670 $7,448 $9,118 
During the three months ended June 30, 2022 and 2021, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at June 30, 2022 and 2021.2022.
The tables below present the balances of assets measured at fair value on a nonrecurring basis at:at the dates shown below:
June 30, 2022 June 30, 2023
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Nonperforming loansNonperforming loans$— $23,938 $11,394 $35,332 Nonperforming loans$— $26,771 $8,668 $35,439 
Other real estate ownedOther real estate owned— 122 — 122 Other real estate owned— 337 — 337 
Total AssetsTotal Assets$— $24,060 $11,394 $35,454 Total Assets$— $27,108 $8,668 $35,776 

December 31, 2021 December 31, 2022
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(dollars in thousands) (dollars in thousands)
Nonperforming loansNonperforming loans$— $42,538 $12,247 $54,785 Nonperforming loans$— $23,140 $11,636 $34,776 
Other real estate ownedOther real estate owned— 729 — 729 Other real estate owned— 553 — 553 
Total AssetsTotal Assets$— $43,267 $12,247 $55,514 Total Assets$— $23,693 $11,636 $35,329 
The following losses were realized on the assets measured on a nonrecurring basis:
For the Three Months Ended June 30,For the Six Months Ended June 30, For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021 2023202220232022
(dollars in thousands) (dollars in thousands)
Nonperforming loansNonperforming loans$(367)$(2,527)$(567)$(2,314)Nonperforming loans$(848)$(367)$(500)$(567)
Other real estate ownedOther real estate owned(13)— (13)— Other real estate owned— (13)— (13)
Total lossesTotal losses$(380)$(2,527)$(580)$(2,314)Total losses$(848)$(380)$(500)$(580)
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
4449
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is performed to determine fair value for 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 $0.1$0.3 million as of June 30, 20222023 and consists of twothree residential real estate properties in Pennsylvania. We review whether events and circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not be recoverable. If events and circumstances indicate further impairment we will record a charge to the extent that the carrying value of the assets exceed their fair values, less estimated cost to sell, as determined by valuation techniques appropriate in the circumstances.
Certain other assets and liabilities, including goodwill, core deposit intangibles and customer list intangibles are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Additional information related to goodwill is provided in Note 12,13, “Goodwill.” There were no other assets or liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2022.2023.
FASB ASC Topic 825-10, “Transition Related to FSP FAS 107-1” and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are as discussed above. The methodologies for other financial assets and financial liabilities are discussed below.
Cash and due from banks and interest-bearing bank deposits: The carrying amounts for cash and due from banks and interest-bearing bank deposits approximate the estimated fair values of such assets.
Securities: Fair values for securities available for sale and held to maturity are based on quoted market prices, if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of other investments, which includes FHLB stock and other equity investments, is considered a reasonable estimate of fair value.
Loans: The fair values of all loans are estimated by discounting the estimated future cash flows using interest rates currently offered for loans with similar terms to borrowers of similar credit quality adjusted for past due and nonperforming loans.
Loans held for sale: The estimated fair value of loans held for sale is based on market bids obtained from potential buyers.
Off-balance sheet instruments: Many of First Commonwealth’s off-balance sheet instruments, primarily loan commitments and standby letters of credit, are expected to expire without being drawn upon; therefore, the commitment amounts do not necessarily represent future cash requirements. FASB ASC Topic 460, “Guarantees” clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The carrying amount and estimated fair value for standby letters of credit was $0.1 million at both June 30, 20222023 and December 31, 2021.2022. See Note 5,6, “Commitments and Contingent Liabilities,” for additional information.
Deposit liabilities: The estimated fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date because of the customers’ ability to withdraw funds immediately. The carrying value of variable rate time deposit accounts and certificates of deposit approximate their fair values at the report date. Also, fair values of fixed rate time deposits for both periods are estimated by discounting the future cash flows using interest rates currently being offered and a schedule of aggregated expected maturities.
Short-term borrowings: The fair values of borrowings from the FHLB were estimated based on the estimated incremental borrowing rate for similar type borrowings. The carrying amounts of other short-term borrowings, such as federal funds purchased and securities sold under agreement to repurchase, were used to approximate fair value due to the short-term nature of the borrowings.
4550
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subordinated debt and long-term debt: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, 2022 June 30, 2023
 Fair Value Measurements Using:  Fair Value Measurements Using:
Carrying
Amount		TotalLevel 1Level 2Level 3 Carrying
Amount		TotalLevel 1Level 2Level 3
(dollars in thousands) (dollars in thousands)
Financial assetsFinancial assetsFinancial assets
Cash and due from banksCash and due from banks$120,267 $120,267 $120,267 $— $— Cash and due from banks$123,095 $123,095 $123,095 $— $— 
Interest-bearing depositsInterest-bearing deposits179,533 179,533 179,533 — — Interest-bearing deposits325,774 325,774 325,774 — — 
Securities available for saleSecurities available for sale863,622 863,622 — 863,622 — Securities available for sale738,109 738,109 — 738,109 — 
Securities held to maturitySecurities held to maturity492,229 437,880 — 437,880 — Securities held to maturity439,922 364,615 — 364,615 — 
Other investmentsOther investments13,665 13,665 — 12,495 1,170 Other investments46,394 46,394 — 40,212 6,182 
Loans held for saleLoans held for sale12,876 12,876 — 12,876 — Loans held for sale16,300 16,300 — 16,300 — 
Loans7,119,754 7,269,337 — 23,938 7,245,399 
Loans and leasesLoans and leases8,799,836 8,566,743 — 26,771 8,539,972 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
DepositsDeposits8,053,545 8,044,453 — 8,044,453 — Deposits9,146,278 9,130,436 — 9,130,436 — 
Short-term borrowingsShort-term borrowings88,923 80,376 — 80,376 — Short-term borrowings542,839 535,875 — 535,875 — 
Subordinated debtSubordinated debt170,856 163,810 — — 163,810 Subordinated debt177,619 149,932 — — 149,932 
Long-term debtLong-term debt5,221 5,317 — 5,317 — Long-term debt4,495 4,388 — 4,388 — 
Capital lease obligationCapital lease obligation5,675 5,675 — 5,675 — Capital lease obligation5,162 5,162 — 5,162 — 
December 31, 2021 December 31, 2022
 Fair Value Measurements Using:  Fair Value Measurements Using:
Carrying
Amount		TotalLevel 1Level 2Level 3 Carrying
Amount		TotalLevel 1Level 2Level 3
(dollars in thousands) (dollars in thousands)
Financial assetsFinancial assetsFinancial assets
Cash and due from banksCash and due from banks$84,738 $84,738 $84,738 $— $— Cash and due from banks$124,254 $124,254 $124,254 $— $— 
Interest-bearing depositsInterest-bearing deposits310,634 310,634 310,634 — — Interest-bearing deposits29,990 29,990 29,990 — — 
Securities available for saleSecurities available for sale1,041,380 1,041,380 — 1,041,380 — Securities available for sale762,661 762,661 — 762,661 — 
Securities held to maturitySecurities held to maturity541,311 536,651 — 536,651 — Securities held to maturity461,162 386,205 — 386,205 — 
Other investmentsOther investments12,838 12,838 — 11,668 1,170 Other investments26,414 26,414 — 25,244 1,170 
Loans held for saleLoans held for sale18,583 18,583 — 18,583 — Loans held for sale11,869 11,869 — 11,869 — 
Loans6,839,230 7,169,768 — 42,538 7,127,230 
Loans and leasesLoans and leases7,642,143 7,639,721 — 23,140 7,616,581 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
DepositsDeposits7,982,498 7,980,101 — 7,980,101 — Deposits8,005,469 7,992,012 — 7,992,012 — 
Short-term borrowingsShort-term borrowings138,315 136,473 — 136,473 — Short-term borrowings372,694 363,135 — 363,135 — 
Subordinated debtSubordinated debt170,775 175,040 — — 175,040 Subordinated debt170,937 156,621 — — 156,621 
Long-term debtLong-term debt5,573 6,065 — 6,065 — Long-term debt4,862 4,781 — 4,781 — 
Capital lease obligationCapital lease obligation5,921 5,921 — 5,921 — Capital lease obligation5,425 5,425 — 5,425 — 
4651
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1112 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 4125 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 1215 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. As a result of the discontinuance of the LIBOR rate on June 30, 2023, both of these swap contracts were amended to hedge exposure to the variability of the 3-month CME Term Secured Overnight Financing Rate ("SOFR"), instead of the 3-month LIBOR rate. This change is in agreement with amendments made to the interest rate on the subordinated debentures as a result of the discontinuance of LIBOR.
During 2021, the Company entered into eight interest rate swap contracts that were designated as cash flow hedges. The interest rate swaps have a total notional amount of $500.0 million: $75.0 million with an original maturity of three years, $250.0 million with an original maturity of four years and $175.0 million with an original maturity of five years. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest payments on commercial loans benchmarked to the 1-month LIBOR rate. Therefore, the interest rate swaps convert the interest payments on the first $500.0 million of 1-month LIBOR based commercial loans into fixed rate payments. All of these interest rate swap contracts were amended to hedge the Company's exposure to the 3-month CME SOFR rate, which is the new benchmark rate used for the commercial loans after the discontinuance of LIBOR on June 30, 2023.
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, 2022,2023, there was a negative impact of $0.2$4.8 million on net interest income and for the six months ended June 30, 2022, there was a positive impact of $0.4$9.0 million, respectively, on net interest income as a result of these interest rate swaps. Changes in the fair value of the cash flow hedges are reported on the balance sheet and in OCI. When
52
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2022,2023, and changes in the fair value attributed to hedge ineffectiveness were not material.
47
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, 20222023 was a decreasean increase of $0.3$0.1 million and $1.5$0.4 million, respectively.
Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. We determine the fair value of rate lock commitments and delivery contracts by measuring the fair value of the underlying asset, which is impacted by current interest rates and taking into consideration the probability that the rate lock commitments will close or will be funded. At June 30, 2022,2023, the underlying funded mortgage loan commitments had a carrying value of $4.7$7.5 million and a fair value of $3.9$7.9 million, while the underlying unfunded mortgage loan commitments had a notional amount of $35.3$33.5 million. At December 31, 2021,2022, the underlying funded mortgage loan commitments had a carrying value of $11.0$4.3 million and a fair value of $11.9$4.0 million, while the underlying unfunded mortgage loan commitments had a notional amount of $29.7$12.0 million. The interest rate lock commitments increased other noninterest income by $0.6 million and decreased other noninterest income by $0.3 million and $0.1 million, respectively, for the three and six months ended June 30, 2022, respectively.2023.
In addition, based on customer activity, a small amount of interest income on loans ismay be exposed to changes in foreign exchange rates. Several commercial borrowers have a portion of their operations outside of the United States and from time to time borrow funds on a short-term basis to fund those operations. In order to reduce the risk related to the translation of foreign denominated transactions into U.S. dollars, the Company entersmay enter into foreign exchange forward contracts. These contracts relate principally to the Euro and the Canadian dollar. The contracts are recorded at fair value with changes in fair value recorded in "Other operating expense" in the unaudited Consolidated Statements of Income. The increase inAt June 30, 2023 and December 31, 2022, there were no foreign exchange contracts outstanding and there was no impact to other noninterest expense for the three and six months ended June 30, 2022 totaled $3 thousand and $2 thousand, respectively.2023.

53
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table 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, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands) (dollars in thousands)
Derivatives not Designated as Hedging InstrumentsDerivatives not Designated as Hedging InstrumentsDerivatives not Designated as Hedging Instruments
Credit value adjustmentCredit value adjustment$(6)$(395)Credit value adjustment$(35)$(27)
Notional amount:Notional amount:Notional amount:
Interest rate derivativesInterest rate derivatives701,916 708,759 Interest rate derivatives829,807 816,745 
Interest rate capsInterest rate caps15,502 66,007 Interest rate caps15,173 15,340 
Interest rate collarsInterest rate collars35,354 35,354 Interest rate collars35,354 35,354 
Risk participation agreementsRisk participation agreements270,402 241,111 Risk participation agreements200,932 256,043 
Sold credit protection on risk participation agreementsSold credit protection on risk participation agreements(64,644)(95,618)Sold credit protection on risk participation agreements(98,738)(100,741)
Interest rate optionsInterest rate options35,346 29,691 Interest rate options33,474 12,009 
Derivatives Designated as Hedging InstrumentsDerivatives Designated as Hedging InstrumentsDerivatives Designated as Hedging Instruments
Interest rate swaps:Interest rate swaps:Interest rate swaps:
Fair value adjustmentFair value adjustment(29,693)(7,022)Fair value adjustment(36,371)(38,596)
Notional amountNotional amount570,000 570,000 Notional amount570,000 570,000 
Interest rate forwards:Interest rate forwards:Interest rate forwards:
Fair value adjustmentFair value adjustment243 (29)Fair value adjustment193 63 
Notional amountNotional amount34,000 38,000 Notional amount33,000 16,000 
Foreign exchange forwards:Foreign exchange forwards:Foreign exchange forwards:
Fair value adjustmentFair value adjustment5 12 Fair value adjustment— — 
Notional amountNotional amount1,389 1,982 Notional amount— — 
 
48
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," 'Otherincome", "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 June 30,For the Six Months Ended June 30,
2022202120222021 2023202220232022
(dollars in thousands) (dollars in thousands)
Non-hedging interest rate derivativesNon-hedging interest rate derivativesNon-hedging interest rate derivatives
(Decrease) increase in other income$(256)$(27)$(1,104)$309 
Increase (decrease) in other incomeIncrease (decrease) in other income$164 $(256)$403 $(1,104)
Hedging interest rate derivativesHedging interest rate derivativesHedging interest rate derivatives
(Decrease) increase in interest and fees on loans(Decrease) increase in interest and fees on loans(68)305 687 305 (Decrease) increase in interest and fees on loans(5,412)(68)(10,170)687 
Increase in interest from subordinated debentures94 236 318 462 
(Decrease) increase in interest from subordinated debentures(Decrease) increase in interest from subordinated debentures(650)94 (1,210)318 
Hedging interest rate forwardsHedging interest rate forwardsHedging interest rate forwards
Increase (decrease) in other income593 641 (272)(401)
(Decrease) increase in other income(Decrease) increase in other income(253)593 (130)(272)
Hedging foreign exchange forwardsHedging foreign exchange forwardsHedging foreign exchange forwards
(Decrease) increase in other expense(3)3 (2)5 
Decrease in other expenseDecrease in other expense— (3)— (2)

The fair value of our derivatives is included in a table in Note 10,11, “Fair Values of Assets and Liabilities,” in the line items
“Other “Other assets” and “Other liabilities.”
Note 1213 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
54
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.
We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill as of bothat June 30, 20222023 and December 31, 20212022 was $363.7 million and $303.3 million.million, respectively. The $60.4 million increase in goodwill during the six months ended June 30, 2023 is the result of the Centric acquisition. No impairment charges on goodwill or other intangible assets were incurred in 20222023 or 2021.2022.
We test goodwill for impairment as of November 30th each year and again at any quarter-end if any material events occur during a quarter that may affect goodwill.
As of June 30, 2022,2023, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

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

Note 1314 Subordinated Debentures
Subordinated debentures outstanding are as follows:
 June 30, 2022December 31, 2021  June 30, 2023December 31, 2022
DueRateAmountAmount DueRateLIBOR Replacement RateAmountAmount
 (dollars in thousands)  (dollars in thousands)
Owed to:Owed to:Owed to:
First Commonwealth BankFirst Commonwealth Bank20284.875% until June 1, 2023, then 3-Month LIBOR + 1.845%$49,453 $49,407 First Commonwealth Bank20283-Month LIBOR + 1.845%3-month CME Term SOFR + 0.26161%$49,546 $49,499 
First Commonwealth BankFirst Commonwealth Bank20335.50% until June 1, 2028, then 3-Month LIBOR + 2.37%49,236 49,201 First Commonwealth Bank20335.50% until June 1, 2028, then 3-Month LIBOR + 2.37%3-month CME Term SOFR + 0.26161%49,306 49,271 
First Commonwealth Financial CorpFirst Commonwealth Financial Corp20314.50% until March 29, 2026, then Prime + 1.00%N/A - LIBOR not used6,600 — 
First Commonwealth Capital Trust IIFirst Commonwealth Capital Trust II20343-Month LIBOR + 2.85%30,929 30,929 First Commonwealth Capital Trust II20343-Month LIBOR + 2.85%3-month CME Term SOFR + 0.26161%30,929 30,929 
First Commonwealth Capital Trust IIIFirst Commonwealth Capital Trust III20343-Month LIBOR + 2.85%41,238 41,238 First Commonwealth Capital Trust III20343-Month LIBOR + 2.85%3-month CME Term SOFR + 0.26161%41,238 41,238 
TotalTotal$170,856 $170,775 Total$177,619 $170,937 
With the acquisition of Centric, First Commonwealth acquired a ten-year subordinated note with a principal balance of $6.0 million. The rate remains fixed at 4.50% until March 29, 2026, then adjusts quarterly to Prime + 1.00%. The Bank may redeem the notes, beginning with the interest payment due on March 29, 2026, in whole or in part at a redemption price equal to 100% of the principal amount of the subordinated notes, plus accrued and unpaid interest to the date of redemption. A fair value premium of $0.6 million was recognized in connection with the acquisition.
On May 21, 2018, First Commonwealth issued ten-year subordinated notes with an aggregate principal amount of $50.0 million andmillion. Interest is paid quarterly at 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%. TheAs a result of the discontinuance of the LIBOR rate as an available benchmark rate on June 30, 2023, beginning with the first rate reset after June 30, 2023 the rate will adjust quarterly to the three-month CME term SOFR + 0.26161%. Subject to regulatory approval, 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%. As a result of the discontinuance of the LIBOR rate, when these notes convert to a floating rate they will adjust quarterly to the three-month CME term SOFR + 0.26161%. 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
55
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. As a result of the discontinuance of the LIBOR rate as an available benchmark rate on June 30, 2023, beginning with the first rate reset after June 30, 2023 the rate will adjust quarterly to the three-month CME term SOFR + 0.26161%. 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. As a result of the discontinuance of the LIBOR rate as an available benchmark rate on June 30, 2023, beginning with the first rate reset after June 30, 2023 the rate will adjust quarterly to the three-month CME term SOFR + 0.26161%. 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 LIBORindex rate based portion of the interest rate on Capital Trust II at 1.515% until August 15, 2024 and on Capital Trust III at 1.525% until August 15, 2026. Additional information related to these cash flow hedges can be found in Note 11-12- "Derivatives".
Note 1415 Revenue Recognition

Substantially all of the Company’s revenue is generated from contracts with customers. Revenue associated with financial instruments, including revenue from loans and securities, certain noninterest income streams such as fees associated with derivatives are not in scope of FASB ASC Topic 606 - "Revenue from Contracts with Customers" ("Topic 606"). Topic 606 is
50
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Trust Income

Trust income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon a tiered scale of market value of the assets under management at month-end. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as financial planning or tax return preparation services are also available to trust customers. The Company’s performance obligation for these transactional-based services is generally satisfied and related revenue recognized at a point in time. Payment is received shortly after services are rendered.
56
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $2.0$2.1 million and $1.7$2.0 million in commission expense as of June 30, 2023 and 2022, and 2021, respectively.

51
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Card-Related Interchange Income

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

Other Income

Other income includes service revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for these services are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.
57
ITEM 1. Financial Statements and Supplementary Data
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gains(losses) on sales of OREO

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

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606:
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
 (dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income$2,573 $2,706 $5,286 $5,222 
Service charges on deposit accounts4,886 4,310 9,501��8,357 
Insurance and retail brokerage commissions2,486 1,978 4,758 4,150 
Card-related interchange income7,137 7,406 13,627 13,833 
Gain on sale of other loans and assets310 337 353 506 
Other income1,098 1,103 2,073 2,083 
Noninterest Income (in-scope of Topic 606)18,490 17,840 35,598 34,151 
Noninterest Income (out-of-scope of Topic 606)6,019 8,246 12,887 19,290 
Total Noninterest Income$24,509 $26,086 $48,485 $53,441 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2023202220232022
 (dollars in thousands)
Noninterest Income
In-scope of Topic 606:
Trust income$2,532 $2,573 $5,018 $5,286 
Service charges on deposit accounts5,324 4,886 10,242 9,501 
Insurance and retail brokerage commissions2,314 2,486 4,866 4,758 
Card-related interchange income7,372 7,137 14,201 13,627 
Gain on sale of other loans and assets105 310 166 353 
Other income1,067 1,098 2,136 2,073 
Noninterest Income (in-scope of Topic 606)18,714 18,490 36,629 35,598 
Noninterest Income (out-of-scope of Topic 606)5,809 6,019 10,857 12,887 
Total Noninterest Income$24,523 $24,509 $47,486 $48,485 
5258
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, 20222023 and 2021,2022, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of First Commonwealth or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may,” are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
•Local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that impact.
•Volatility and disruption in national and international financial markets.
•Government intervention in the U.S. financial system.
•Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
•Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
•Inflation, interest rate, securities market and monetary fluctuations.
•Unexpected outflows of uninsured deposits.
•The effect of changes in laws and regulations, (including lawsincluding with respect to capital, and regulations concerning taxes, banking, securitiesliquidity requirements, which may become more stringent in light of recent market events, may adversely affect our financial condition or results of operations.
•Factors that can impact the performance of our loan portfolio, including changes in real estate values and insurance) with whichliquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we and our subsidiaries must comply.finance, including any loans acquired in acquisition transactions.
•The soundness of other financial institutions.
•Political instability.
•Impairment of our goodwill or other intangible assets.
•Acts of God or of war or terrorism.
•The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
•Changes in consumer spending, borrowings and savings habits.
•Changes in the financial performance and/or condition of our borrowers.
•Technological changes.
•The cost and effects of cyber incidents or other failures, interruption or security breaches of our systems or those of third-party providers.
•Acquisitions and integration of acquired businesses.
•Our ability to increase market share and control expenses.
•Our ability to attract and retain qualified employees.
•Changes in the competitive environment in our markets and among banking organizations and other financial service providers.
59
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


•The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
•Changes in the reliability of our vendors, internal control systems or information systems.
•Changes in our liquidity position.
53
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


•Changes in our organization, compensation and benefit plans.
•The impact of the ongoing COVID-19 pandemic and any other pandemic, epidemic or health-related crisis.
•The costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals.
•Greater than expected costs or difficulties related to the integration of new products and lines of business.
•Our success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.
Explanation of Use of Non-GAAP Financial MeasureMeasures
In addition to the results of operations presented in accordance with generally accepted accounting principles (“GAAP”), First Commonwealth management uses, and this quarterly report contains or references, certain non-GAAP financial measures, such as net interest income on a fully taxable equivalent basis. We believe these non-GAAP financial measures provide information that is useful to investors in understanding our underlying operational performance and our business and performance trends as they facilitate comparison with the performance of others in the financial services industry. Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.
We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 5762 and 6570, respectively, for the six and three months ended June 30, 20222023 and 2021.2022.
5460
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 June 30,For the Six Months Ended June 30,
20222021202220212023202220232022
(dollars in thousands, except per share data)(dollars in thousands, except per share data)
Net IncomeNet Income$30,754 $29,619 $58,480 $69,389 Net Income$42,781 $30,754 $73,005 $58,480 
Per Share Data:Per Share Data:Per Share Data:
Basic Earnings per ShareBasic Earnings per Share$0.33 $0.31 $0.62 $0.72 Basic Earnings per Share$0.42 $0.33 $0.72 $0.62 
Diluted Earnings per ShareDiluted Earnings per Share0.33 0.31 0.62 0.72 Diluted Earnings per Share0.42 0.33 0.72 0.62 
Cash Dividends Declared per Common ShareCash Dividends Declared per Common Share0.120 0.115 0.235 0.225 Cash Dividends Declared per Common Share0.125 0.120 0.245 0.235 
Average Balance:Average Balance:Average Balance:
Total assetsTotal assets$9,600,469 $9,451,683 $9,562,733 $9,291,956 Total assets$11,156,913 $9,600,469 $10,824,756 $9,562,733 
Total equityTotal equity1,063,850 1,098,094 1,085,512 1,087,384 Total equity1,234,834 1,063,850 1,198,147 1,085,512 
End of Period Balance:End of Period Balance:End of Period Balance:
Net loans and leases (1)
Net loans and leases (1)
$7,039,027 $6,663,027 
Net loans and leases (1)
$8,682,590 $7,039,027 
Total assetsTotal assets9,526,427 9,402,402 Total assets11,318,604 9,526,427 
Total depositsTotal deposits8,053,545 7,885,019 Total deposits9,146,278 8,053,545 
Total equityTotal equity1,049,158 1,106,419 Total equity1,232,419 1,049,158 
Key Ratios:Key Ratios:Key Ratios:
Return on average assetsReturn on average assets1.28 %1.26 %1.23 %1.51 %Return on average assets1.54 %1.28 %1.36 %1.23 %
Return on average equityReturn on average equity11.60 %10.82 %10.86 %12.87 %Return on average equity13.90 %11.60 %12.29 %10.86 %
Dividends payout ratioDividends payout ratio36.36 %37.10 %37.90 %31.25 %Dividends payout ratio29.76 %36.36 %34.03 %37.90 %
Average equity to average assets ratioAverage equity to average assets ratio11.08 %11.62 %11.35 %11.70 %Average equity to average assets ratio11.07 %11.08 %11.07 %11.35 %
Net interest marginNet interest margin3.38 %3.17 %3.29 %3.29 %Net interest margin3.85 %3.38 %3.93 %3.29 %
Net loans to deposits ratioNet loans to deposits ratio87.40 %84.50 %Net loans to deposits ratio94.93 %87.40 %
(1) Includes loans held for sale.

Results of Operations
Six Months Ended June 30, 20222023 Compared to Six Months Ended June 30, 20212022
Net Income
For the six months ended June 30, 2022,2023, First Commonwealth had net income of $73.0 million, or $0.72 diluted earnings per share, compared to net income of $58.5 million, or $0.62 diluted earnings per share, compared to net income of $69.4 million, or $0.72 diluted earnings per share, in the six months ended June 30, 2021.2022. The decreaseincrease in net income was primarily the result of a $6.1$50.3 million increase in net interest income and a $5.9 million decrease in provision for credit losses, recognized duringexcluding the six months ended June 30, 2022 compared$10.7 million in provision expense related to a provision of $1.0 million recognizedthe day 1 CECL adjustment on non-PCD loans acquired in the same periodCentric acquisition. Partially offsetting these positive changes was a $25.9 million increase in 2021. Additionally, noninterest income decreased $5.0 million and noninterest expense increased $8.0 million during the six months ended June 30, 2022 compared to the same period in 2021.expense.
For the six months ended June 30, 2022,2023, the Company’s return on average equity was 10.86%12.29% and its return on average assets was 1.23%1.36%, compared to 12.87%10.86% and 1.51%1.23%, respectively, for the six months ended June 30, 2021.2022.
Net Interest Income
Net interest income, on a fully taxable equivalent basis, was $142.3$192.8 million in the first six months of 2022,2023, compared to $138.2$142.3 million for the same period in 2021.2022. The increase in net interest income can be attributed to growth in earning assets and a 9159 basis point decreaseincrease in the yield on interest-earning assets offset by a 137 basis point increase in the cost of interest-bearing liabilities and a $251.0 million increase in average interest-earning assets, partially offset by a 6 basis point decrease in the yield on interest-earning assets.liabilities. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 80.2% and 74.5% for the six months ended June 30, 2023 and 2022, respectively.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


interest income before provision expense plus noninterest income), at 74.5% and 72.0% for the six months ended June 30, 2022 and 2021, respectively.
The net interest margin on a fully taxable equivalent basis was 3.29%3.93% for both the six months ended June 30, 20222023 and 3.29% for the six months ended June 30, 2021.2022. The net interest margin is primarily attributable toaffected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.
 
The taxable equivalent yield on interest-earning assets was 3.43%5.02% for the six months ended June 30, 2022, a decrease2023, an increase of 6159 basis points compared to the 3.49%3.43% yield for the same period in 2021. Contributing to this decrease2022. This change is a $423.8 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 forgiveness by the US Government, the funds were used to fund growth in the loan and investment portfolios. Also impacting the yield on interest-earning assets for the six months ended June 30, 2022 was $1.2 million in interest and loan fees recognized when a nonaccrual loan was paid off during the second quarter. The interest and fees collected on this loan increased the net interest margin for the six months ended June 30, 2022 by 3 basis points.

The loan yield for the six months ended June 30, 2022, decreased 10 basis points compared to the same period in 2021. The decrease was primarilylargely due to a decline in average PPP loans outstanding. These loans,higher loan portfolio yield, which were originated under the CARES Act, had an average balance of $35.6 million with a stated loan rate of 1% and a yield of 13.38% forimproved by 154 basis points when compared to the six months ended June 30, 2022. DuringContributing to this increase was the six months endedyield on our adjustable and variable rate commercial loan portfolios, which increased 262 basis points largely due to the Federal Reserve increasing short term interest rates by 350 basis points since June 30, 2021, PPP loans averaged $459.5 million with a yield2022. Additionally, 9 basis points of 5.89%. Thethe increase in the yield on PPP loans includesinterest-earnings assets can be attributed to the recognition of PPP loan deferred processing fees, net$4.4 million in accretion of deferred origination costs, of $2.0 million for the six months ended June 30, 2022. These amounts arepurchase accounting marks recognized in interest income as a yield adjustment over the liferesult of the loan with accelerated recognition when a loan is forgiven or paid off. As of June 30, 2022, we expect to recognize additional PPP-related deferred processing fees, net of origination costs, of approximately $0.4 million as an adjustment to yield over the remaining terms of the loans. The balance of PPP loans outstanding at June 30, 2022 totaled $12.9 million. During the six months ended June 30, 2022, PPP loans generated $2.4 million in income compared to $13.4 million during the same period in 2021. For the six months ended June 30, 2022, PPP loans increased the yield on total loans and the net interest margin by 5 basis points. PPP loans increased the yield on total loans by 14 basis points and the net interest margin by 15 basis points during the six months ended June 30, 2021.Centric acquisition.

The investment portfolio yield increased 129 basis pointpoints in comparison to the prior year as a result of $103.6 million in average growth at a time when new volume rates were higher than the portfolio yield. Growth in theThe average investment portfolio is a result of continued deposit growthbalance decreased $233.0 million as well as a decline in interest-bearing deposits with banks, which decreased from $349.7 million in 2021 to $308.5 million in 2022.maturities and runoff funded loan growth. The change in the level and rate paidyield on interest-bearing deposits with banks increased the yield on earning assets by 10466 basis points for the six months ended June 30, 2022.2023 as compared to the prior year, while the average balance decreased from an average of $308.5 million in 2022 to $178.1 million in 2023.
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 decreasedincreased to 0.22%1.59% for the six months ended June 30, 2022,2023, from 0.31%0.22% for the same period in 2021. Lower market interest rates and management's efforts to reduce deposit costs resulted in the2022. The cost of interest-bearing deposits decreasing 7increased 127 basis points and short-term borrowings decreasing 3increased 429 basis points in comparison to the same period last year. The increase in cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates offered in money market and time deposits. Comparing the six months ended June 30, 2023 with the comparable period in 2022, average time deposits increased $442.6 million, or 121.5%, with an increase in the cost of these deposits of 247 basis points. Contributing to average growth in time deposits was an average of $76.9 million related to the Centric acquisition. Other interest-bearing deposits increased on average $430.2 million, or 8.6%, compared to the six months ended June 30, 2022 and the cost of these deposits increased 108 basis points. Average growth in other-interest bearing deposits attributable to the Centric acquisition totaled $296.3 million.
For the six months ended June 30, 2022,2023, changes in rates negativelypositively impacted net interest income by $1.6$24.2 million when compared with the same period in 2021.2022. The lowerhigher yield on interest-earning assets which was largely drivenimpacted net interest income by lower income on PPP loans,$70.9 million, while the increase in the cost of interest-bearing liabilities negatively impacted net interest income by $2.9 million, while the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $1.2$46.7 million.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $5.7$26.2 million for the six months ended June 30, 2022,2023, as compared to the same period in 2021.2022. Higher levels of interest-earning assets resulted in an increase of $4.6$27.1 million in interest income, and changes in the volume and mix of interest-bearing liabilities decreasedincreased interest expense by $1.1 million, primarily due to decreases in the cost of long-term debt and time deposits.$0.9 million. Average earning assets for the six months ended June 30, 20222023 increased $251.0 million,$1.2 billion, or 3.0%13.4%, compared to the same period in 2021.2022. Average loans for the comparable period increased $188.7 million,$1.5 billion, or 2.8%22.0%.
Net interest income also benefited from a $136.9$44.6 million increase in average net free funds at June 30, 20222023 as compared to June 30, 2021.2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest componenthigher level of the increase in net free funds was an increasethe result of $168.9 million, or 6.7%,increases in noninterest-bearing demand deposit average balances. Average time deposits for the six months ended June 30, 2022 decreased by $128.9 million compared to the comparable period in 2021, while the average rate paid on time deposits decreased 35 basis points compared to the same period in 2021.
56
ITEM 2. Management’s Discussionother liabilities and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


shareholders' equity.
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 months ended June 30:
 
2022202120232022
(dollars in thousands) (dollars in thousands)
Interest income per Consolidated Statements of IncomeInterest income per Consolidated Statements of Income$147,972 $146,112 Interest income per Consolidated Statements of Income$245,856 $147,972 
Adjustment to fully taxable equivalent basisAdjustment to fully taxable equivalent basis498 598 Adjustment to fully taxable equivalent basis610 498 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)Interest income adjusted to fully taxable equivalent basis (non-GAAP)148,470 146,710 Interest income adjusted to fully taxable equivalent basis (non-GAAP)246,466 148,470 
Interest expenseInterest expense6,138 8,471 Interest expense53,674 6,138 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$142,332 $138,239 Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$192,792 $142,332 

5762
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 months ended June 30:
 
20222021 20232022
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)
AssetsAssetsAssets
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Interest-bearing deposits with banksInterest-bearing deposits with banks$308,450 $769 0.50 %$349,747 $167 0.10 %Interest-bearing deposits with banks$178,084 $4,553 5.16 %$308,450 $769 0.50 %
Tax-free investment securitiesTax-free investment securities23,771 312 2.65 29,539 402 2.74 Tax-free investment securities21,772 292 2.70 23,771 312 2.65 
Taxable investment securitiesTaxable investment securities1,439,200 13,048 1.83 1,329,843 11,947 1.81 Taxable investment securities1,208,158 12,710 2.12 1,439,200 13,048 1.83 
Loans and leases, net of unearned income (b)(c)
Loans and leases, net of unearned income (b)(c)
6,965,296 134,341 3.89 6,776,560 134,194 3.99 
Loans and leases, net of unearned income (b)(c)
8,496,305 228,911 5.43 6,965,296 134,341 3.89 
Total interest-earning assetsTotal interest-earning assets8,736,717 148,470 3.43 8,485,689 146,710 3.49 Total interest-earning assets9,904,319 246,466 5.02 8,736,717 148,470 3.43 
Noninterest-earning assets:Noninterest-earning assets:Noninterest-earning assets:
CashCash117,350 92,243 Cash110,367 117,350 
Allowance for credit lossesAllowance for credit losses(93,180)(104,239)Allowance for credit losses(129,242)(93,180)
Other assetsOther assets801,846 818,263 Other assets939,312 801,846 
Total noninterest-earning assetsTotal noninterest-earning assets826,016 806,267 Total noninterest-earning assets920,437 826,016 
Total AssetsTotal Assets$9,562,733 $9,291,956 Total Assets$10,824,756 $9,562,733 
Liabilities and Shareholders’ EquityLiabilities and Shareholders’ EquityLiabilities and Shareholders’ Equity
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing demand deposits (d)
Interest-bearing demand deposits (d)
$1,591,886 $213 0.03 %$1,503,501 $220 0.03 %
Interest-bearing demand deposits (d)
$1,947,587 $10,369 1.07 %$1,591,886 $213 0.03 %
Savings deposits (d)
Savings deposits (d)
3,432,397 906 0.05 3,228,379 1,750 0.11 
Savings deposits (d)
3,506,907 20,081 1.15 3,432,397 906 0.05 
Time depositsTime deposits364,388 491 0.27 493,259 1,515 0.62 Time deposits806,981 10,969 2.74 364,388 491 0.27 
Short-term borrowingsShort-term borrowings105,497 39 0.07 117,155 58 0.10 Short-term borrowings351,321 7,594 4.36 105,497 39 0.07 
Long-term debtLong-term debt181,988 4,489 4.97 219,731 4,928 4.52 Long-term debt186,378 4,661 5.04 181,988 4,489 4.97 
Total interest-bearing liabilitiesTotal interest-bearing liabilities5,676,156 6,138 0.22 5,562,025 8,471 0.31 Total interest-bearing liabilities6,799,174 53,674 1.59 5,676,156 6,138 0.22 
Noninterest-bearing liabilities and shareholders’ equity:Noninterest-bearing liabilities and shareholders’ equity:Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)
Noninterest-bearing demand deposits (d)
2,678,686 2,509,818 
Noninterest-bearing demand deposits (d)
2,629,575 2,678,686 
Other liabilitiesOther liabilities122,379 132,729 Other liabilities197,860 122,379 
Shareholders’ equityShareholders’ equity1,085,512 1,087,384 Shareholders’ equity1,198,147 1,085,512 
Total Noninterest-Bearing Funding SourcesTotal Noninterest-Bearing Funding Sources3,886,577 3,729,931 Total Noninterest-Bearing Funding Sources4,025,582 3,886,577 
Total Liabilities and Shareholders’ EquityTotal Liabilities and Shareholders’ Equity$9,562,733 $9,291,956 Total Liabilities and Shareholders’ Equity$10,824,756 $9,562,733 
Net Interest Income and Net Yield on Interest-Earning AssetsNet Interest Income and Net Yield on Interest-Earning Assets$142,332 3.29 %$138,239 3.29 %Net Interest Income and Net Yield on Interest-Earning Assets$192,792 3.93 %$142,332 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 six months ended June 30, 20222023 and 2021.2022.
(b)Loan balances include held for sale and nonaccrual loans. Income on nonaccrual loans is accounted for on the cash basis.
(c)Loan income includes loan fees earned.
(d)Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.

 
5863
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 months ended June 30, 20222023 compared with June 30, 2021:2022:
 
Analysis of Year-to-Year Changes in Net Interest Income Analysis of Year-to-Year Changes in Net Interest Income
Total
Change		Change Due To
Volume		Change Due To
Rate (a)		 Total
Change		Change Due To
Volume		Change Due To
Rate (a)
(dollars in thousands) (dollars in thousands)
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Interest-bearing deposits with banksInterest-bearing deposits with banks$602 $(20)$622 Interest-bearing deposits with banks$3,784 $(323)$4,107 
Tax-free investment securitiesTax-free investment securities(90)(78)(12)Tax-free investment securities(20)(26)6 
Taxable investment securitiesTaxable investment securities1,101 982 119 Taxable investment securities(338)(2,097)1,759 
Loans and leasesLoans and leases147 3,734 (3,587)Loans and leases94,570 29,533 65,037 
Total interest income (b)Total interest income (b)1,760 4,618 (2,858)Total interest income (b)97,996 27,087 70,909 
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing demand depositsInterest-bearing demand deposits(7)13 (20)Interest-bearing demand deposits10,156 53 10,103 
Savings depositsSavings deposits(844)111 (955)Savings deposits19,175 18 19,157 
Time depositsTime deposits(1,024)(396)(628)Time deposits10,478 593 9,885 
Short-term borrowingsShort-term borrowings(19)(6)(13)Short-term borrowings7,555 85 7,470 
Long-term debtLong-term debt(439)(846)407 Long-term debt172 108 64 
Total interest expenseTotal interest expense(2,333)(1,124)(1,209)Total interest expense47,536 857 46,679 
Net interest incomeNet interest income$4,093 $5,742 $(1,649)Net interest income$50,460 $26,230 $24,230 
(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.  
5964
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


The table below provides a breakout of the provision for credit losses by loan category for the six months ended June 30: 
 20222021
 DollarsPercentageDollarsPercentage
 (dollars in thousands)
Commercial, financial, agricultural and other$4,721 127 %$8,542 292 %
Time and demand4,843 130 8,410 287 
Commercial credit cards191 6 132 5 
Equipment finance272 7 
Time and demand other(585)(16)
Real estate construction1,309 35 (3,816)(130)
Construction other322 9 
Construction residential987 26 
Residential real estate5,206 139 (1,517)(52)
Residential first lien4,401 118 (671)(23)
Residential junior lien/home equity805 21 (846)(29)
Commercial real estate(1,456)(39)(4,641)(159)
Multifamily405 11 (1,860)(64)
Nonowner occupied(3,754)(101)13 — 
Owner occupied1,893 51 (2,794)(95)
Loans to individuals(6,037)(162)4,358 149 
Automobile and recreational vehicles(6,395)(171)3,658 125 
Consumer credit cards11 — 98 3 
Consumer other347 9 602 21 
Provision for credit losses on loans and leases$3,743 100 %$2,926 100 %
Provision for off-balance sheet credit exposure2,320 (1,903)
       Total provision for credit losses$6,063 $1,023 
The provision for credit losses on loans and leases for the six months ended June 30, 2022 increased in comparison to the six months ended June 30, 2021 by $0.8 million.
For the six months ended June 30, 2022, the increase in provision expense for residential first lien as well as the negative provision for automobile and recreational vehicles were 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 as well as a decrease of $2.6 million in reserves on individually analyzed loans. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans.
 20232022
 DollarsPercentageDollarsPercentage
 (dollars in thousands)
Commercial, financial, agricultural and other$3,251 124 %$4,721 127 %
Time and demand1,282 49 4,843 130 
Commercial credit cards13 1 191 6 
Equipment finance1,033 39 272 7 
Time and demand other923 35 (585)(16)
Real estate construction(3,019)(115)1,309 35 
Construction other(1,588)(60)322 9 
Construction residential(1,431)(55)987 26 
Residential real estate1,196 45 5,206 139 
Residential first lien1,081 41 4,401 118 
Residential junior lien/home equity115 4 805 21 
Commercial real estate(378)(14)(1,456)(39)
Multifamily301 12 405 11 
Nonowner occupied310 12 (3,754)(101)
Owner occupied(989)(38)1,893 51 
Loans to individuals1,570 60 (6,037)(162)
Automobile and recreational vehicles1,316 50 (6,395)(171)
Consumer credit cards62 3 11 — 
Consumer other192 7 347 9 
Provision for credit losses on loans and leases$2,620 100 %$3,743 100 %
Provision for credit losses - acquisition day 1 non-PCD10,653 — 
Total provision for credit losses on loans and leases13,273 3,743 
Provision for off-balance sheet credit exposure(2,480)2,320 
       Total provision for credit losses$10,793 $6,063 
Total provision expense for the six months ended June 30, 20222023, increased $4.7 million compared to the six months ended June 30, 2022. This increase is a result of $10.7 million in provision expense recognized in the loan portfolio changes noted abovefirst quarter of 2023 as well as growththe day 1 non-PCD provision expense resulting from the Centric acquisition offset by a $4.8 million decline in the provision for off-balance sheet commitments and the impact on the off balancecommitments. The negative provision for off-balance sheet reserve related to construction commitments because of the annual review of peer loss history data
The provision expense for the six months ended June 30, 20212023 was primarily thea result of an improved economic forecast which reflected a declinelower off-balance sheet commitments related to construction loans and improvement in the projected impact ofeconomic variables considered in the COVID-19 pandemic on the economy and expected loan losses.calculation.
The allowance for credit losses was $93.6$133.5 million, or 1.31%1.52%, of total loans outstanding at June 30, 2022,2023, compared to $92.5$102.9 million, or 1.35%, at December 31, 20212022 and $97.0$93.6 million, or 1.44%1.31%, at June 30, 2021.2022. Nonperforming loans as a percentage of total loans decreasedand leases increased to 0.50%0.54% at June 30, 20222023 from 0.81% at December 31, 2021 and 0.78%0.50% as of June 30, 2021.2022 and 0.46% at December 31, 2022. The allowance to nonperforming loan ratio was 262.25%278.17%, 167.67%289.98% and 183.81%262.25% as of June 30, 2022,2023, December 31, 20212022 and June 30, 2021,2022, respectively.
 
Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at June 30, 2022.2023.
6065
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 months ended June 30, 20222023 and 20212022 and the year-ended December 31, 2021:2022:
 
June 30, 2022June 30, 2021December 31, 2021June 30, 2023June 30, 2022December 31, 2022
(dollars in thousands) (dollars in thousands)
Balance, beginning of periodBalance, beginning of period$92,522 $101,309 $101,309 Balance, beginning of period$102,906 $92,522 $92,522 
Day 1 allowance for credit loss on PCD acquired loansDay 1 allowance for credit loss on PCD acquired loans27,205 — — 
Provision for credit losses - acquisition day 1 non-PCDProvision for credit losses - acquisition day 1 non-PCD10,653 — — 
Loans charged off:Loans charged off:Loans charged off:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other984 4,456 7,020 Commercial, financial, agricultural and other7,340 984 2,361 
Real estate constructionReal estate construction— — 9 Real estate construction— — — 
Residential real estateResidential real estate144 119 309 Residential real estate80 144 339 
Commercial real estateCommercial real estate552 1,557 1,659 Commercial real estate1,517 552 2,487 
Loans to individualsLoans to individuals2,049 2,472 4,061 Loans to individuals2,289 2,049 4,658 
Total loans charged offTotal loans charged off3,729 8,604 13,058 Total loans charged off11,226 3,729 9,845 
Recoveries of loans previously charged off:Recoveries of loans previously charged off:Recoveries of loans previously charged off:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other159 193 2,430 Commercial, financial, agricultural and other254 159 394 
Real estate constructionReal estate construction— 135 155 Real estate construction— — 9 
Residential real estateResidential real estate60 211 468 Residential real estate71 60 187 
Commercial real estateCommercial real estate19 40 135 Commercial real estate136 19 769 
Loans to individualsLoans to individuals829 828 1,460 Loans to individuals927 829 1,349 
Total recoveriesTotal recoveries1,067 1,407 4,648 Total recoveries1,388 1,067 2,708 
Net charge-offsNet charge-offs2,662 7,197 8,410 Net charge-offs9,838 2,662 7,137 
Provision for credit losses on loans charged to expense3,743 2,926 (377)
Provision for credit losses on loans and leases charged to expenseProvision for credit losses on loans and leases charged to expense2,620 3,743 17,521 
Balance, end of periodBalance, end of period$93,603 $97,038 $92,522 Balance, end of period$133,546 $93,603 $102,906 
Net charge-offs as a percentage of average loans and leases outstanding (annualized)Net charge-offs as a percentage of average loans and leases outstanding (annualized)0.08 %0.21 %0.12 %Net charge-offs as a percentage of average loans and leases outstanding (annualized)0.23 %0.08 %0.10 %
Allowance for credit losses as a percentage of end-of-period loans outstanding1.31 %1.44 %1.35 %
Allowance for credit losses as a percentage of end-of-period loans outstanding, excluding PPP loans1.32 %1.49 %1.37 %
Allowance for credit losses as a percentage of end-of-period loans and leases outstandingAllowance for credit losses as a percentage of end-of-period loans and leases outstanding1.52 %1.31 %1.35 %
6166
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 months ended June 30: 
20222021$ Change% Change20232022$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Income:Noninterest Income:Noninterest Income:
Trust incomeTrust income$5,286 $5,222 $64 1 %Trust income$5,018 $5,286 $(268)(5)%
Service charges on deposit accountsService charges on deposit accounts9,501 8,357 1,144 14 Service charges on deposit accounts10,242 9,501 741 8 
Insurance and retail brokerage commissionsInsurance and retail brokerage commissions4,758 4,150 608 15 Insurance and retail brokerage commissions4,866 4,758 108 2 
Income from bank owned life insuranceIncome from bank owned life insurance2,891 3,460 (569)(16)Income from bank owned life insurance2,422 2,891 (469)(16)
Card-related interchange incomeCard-related interchange income13,627 13,833 (206)(1)Card-related interchange income14,201 13,627 574 4 
Swap fee incomeSwap fee income1,607 1,398 209 15 Swap fee income577 1,607 (1,030)(64)
Other incomeOther income4,163 3,921 242 6 Other income4,286 4,163 123 3 
SubtotalSubtotal41,833 40,341 1,492 4 Subtotal41,612 41,833 (221)(1)
Net securities gainsNet securities gains2 16 (14)(88)Net securities gains— 2 (2)(100)
Gain on sale of mortgage loansGain on sale of mortgage loans2,843 8,130 (5,287)(65)Gain on sale of mortgage loans1,905 2,843 (938)(33)
Gain on sale of other loans and assetsGain on sale of other loans and assets3,418 3,801 (383)(10)Gain on sale of other loans and assets3,977 3,418 559 16 
Derivatives mark to marketDerivatives mark to market389 1,153 (764)(66)Derivatives mark to market(8)389 (397)(102)
Total noninterest incomeTotal noninterest income$48,485 $53,441 $(4,956)(9)%Total noninterest income$47,486 $48,485 $(999)(2)%
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 months ended June 30, 2022 increased $1.52023 decreased $0.2 million, or 4%1%, compared to the six months ended June 30, 2021.2022. Service charges on deposit accounts increased $1.1$0.7 million, asof which $0.1 million can be attributed to the Centric acquisition and the remainder due to increased customer activity began to return to pre-COVID levels and swap feeactivity. Card-related interchange income increased $0.2 million due to growth in interest rate swaps entered into for our commercial customers. Insurance and retail brokerage commissions income increased $0.6 million due to growth in annuity sales and trust income increased $0.1 million as a result of growthincreased customer activity. Trust income decreased $0.3 million due to declines in the value of assets under management. Incomemanagement, income from bank owned life insurance decreased $0.6$0.5 million compared to the prior period primarily due to recognitionchanges in market interest rates and swap fee income declined $1.0 million due to a lower volume of a benefit duringinterest rate swaps entered into by our commercial loan customers. For the six months ended June 30, 2021 with no similar benefit during2023, $0.5 million in non-interest income can be attributed to the six months ended June 30, 2022.Centric acquisition.
Total noninterest income decreased $5.0$1.0 million, or 9%2%, compared to the same period in the prior year. The most significant changes, other than the changes noted above, include a $5.3$0.9 million decrease in gain on sale of mortgage loans as a result of changes in volume and the spread received on mortgage loans sold. The mark to market adjustment on interest rate swaps entered into for our commercial loan customers decreased $0.8$0.4 million. This adjustment does not reflect a realized gain or loss on the swaps, but rather relates to changes in fair value due to movements in corporate bond spreads and swap rates. The gain on sale of other loans and assets decreased $0.4partially offset these declines with an increase of $0.6 million due to a loweran increased volume of loans sold, primarily SBA loans, being sold in the first six months of 20222023 compared to the same period in 2021.2022.
6267
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 months ended June 30: 
20222021$ Change% Change20232022$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Expense:Noninterest Expense:Noninterest Expense:
Salaries and employee benefitsSalaries and employee benefits$61,881 $57,018 $4,863 9 %Salaries and employee benefits$70,999 $61,881 $9,118 15 %
Net occupancyNet occupancy8,957 8,654 303 4 Net occupancy9,802 8,957 845 9 
Furniture and equipmentFurniture and equipment7,587 7,814 (227)(3)Furniture and equipment8,522 7,587 935 12 
Data processingData processing6,658 6,244 414 7 Data processing7,167 6,658 509 8 
Advertising and promotionAdvertising and promotion2,660 2,679 (19)(1)Advertising and promotion2,990 2,660 330 12 
Pennsylvania shares taxPennsylvania shares tax1,918 2,090 (172)(8)Pennsylvania shares tax2,425 1,918 507 26 
Intangible amortizationIntangible amortization1,724 1,729 (5)— Intangible amortization2,429 1,724 705 41 
Other professional fees and servicesOther professional fees and services2,418 1,842 576 31 Other professional fees and services2,773 2,418 355 15 
FDIC insuranceFDIC insurance1,400 1,134 266 23 FDIC insurance2,694 1,400 1,294 92 
Other operatingOther operating14,835 12,786 2,049 16 Other operating17,358 14,810 2,548 17 
SubtotalSubtotal110,038 101,990 8,048 8 Subtotal127,159 110,013 17,146 16 
Loss on sale or write-down of assetsLoss on sale or write-down of assets161 52 109 210 Loss on sale or write-down of assets47 161 (114)(71)
Merger and acquisition relatedMerger and acquisition related8,481 — 8,481 N/A
COVID-19 related79 306 (227)(74)
Branch consolidation(104)18 (122)(678)
Litigation and operational lossesLitigation and operational losses1,229 1,035 194 19 Litigation and operational losses1,637 1,229 408 33 
Total noninterest expenseTotal noninterest expense$111,403 $103,401 $8,002 8 %Total noninterest expense$137,324 $111,403 $25,921 23 %
Noninterest expense increased $8.0$25.9 million, or 8%23%, for the six months ended June 30, 20222023 compared to the same period in 2021.2022. Contributing to the increase in expense in 20222023 is a $4.9$8.5 million increase in merger-related expenses associated with the Centric acquisition. Additionally, salaries and employee benefits increased $9.1 million primarily due to annual merit increases and an increase in the number of full time equivalent employees, which increased from 1,392 at June 30, 2021 to 1,409 at June 30, 2022.2022 to 1,483 at June 30, 2023, largely due to the Centric acquisition. Also contributing to this increase was a $2.1 million increase in hospitalization expense as a result of higher claims in 2023. Additionally, increases in net occupancy, furniture and equipment and intangible amortization all reflected increases primarily due to the Centric acquisition. Data processing costs increased $0.5 million due to continued investment in our digital banking and other product offerings. Contributing to the increase in other operating expenses were several expense categories, including credit reporting,printing and postage expense due to new customer disclosures, as well as travel, telephone and operational losses, none of which were individually significant.
FDIC insurance increased $1.3 million due to both the impact of Centric as well as a 2 basis point increase in the FDIC deposit insurance assessment rate which began in the first quarterly assessment period of 2023. The assessment rate increase is estimated to increase the Company's annual FDIC assessment by approximately $1.7 million.
For the six-months ended June 30, 2023, merger and acquisition related expenses totaled $8.5 million and is the result of the acquisition of Centric in the first quarter of 2023.

Income Tax
The provision for income taxes decreased $2.9increased $4.2 million for the six months ended June 30, 2022,2023, compared to the corresponding period in 2021,2022, due to the decreaseincrease in income before income taxes. 
We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the six months ended June 30, 20222023 and 2021.2022.
We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an annual effective tax rate of 19.7%20.3% and 19.9%19.7% for the six months ended June 30, 20222023 and 2021,2022, respectively.
As of June 30, 2022,2023, our deferred tax assets totaled $49.7$72.9 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In
68
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


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.
Results of Operations
Three Months Ended June 30, 20222023 Compared to Three Months Ended June 30, 20212022
Net Income
For the three months ended June 30, 2022,2023, First Commonwealth recognized net income of $42.8 million, or $0.42 diluted earnings per share, compared to net income of $30.8 million, or $0.33 diluted earnings per share, compared to net income of $29.6 million, or $0.31 diluted earnings per share, in the three months ended
63
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


June 30, 2021.2022. The increase in net income was primarily the result of a $24.2 million increase in net interest income and a $1.3 million decrease in the provision for credit losses and a $5.5 million increase in net interest income, which was offset by a $4.1$10.3 million increase in noninterest expense and a $1.6 million decrease in noninterest income.expense.
For the three months ended June 30, 2022,2023, the Company’s return on average equity was 11.60%13.90% and its return on average assets was 1.28%1.54%, compared to 10.82%11.60% and 1.26%1.28%, respectively, for the three months ended June 30, 2021.2022.
Net Interest Income
Net interest income, on a fully taxable equivalent basis, was $73.9$98.1 million in the second quarter of 2022,2023, compared to $68.5$73.9 million for the same period in 2021. This increase was2022. Accretion of purchase accounting marks related to the result of $112.4 million of growth in average interest-earning assets combined with a $60.9 million decrease in interest-bearing liabilities. The impact of these changes resulted in a 21Centric acquisition contributed 14 basis point increase inpoints to the net interest margin.margin in the second quarter of 2023. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 75.0%80.0% and 72.3%75.0% for the three months ended June 30, 20222023 and 2021,2022, respectively.
The net interest margin, on a fully taxable equivalent basis, was 3.38%3.85% and 3.17%3.38% for the three months ended June 30, 20222023 and June 30, 2021,2022, respectively. The increase in the net interest margin is attributable to both changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The taxable equivalent yield on interest-earning assets was 3.52%5.16% for the three months ended June 30, 2022,2023, an increase of 17164 basis points compared to the 3.35%3.52% yield for the same period in 2021.2022. This is largely due to an increase in the investment portfolio yield of 14 basis points and an 8a 161 basis point increase in the loan portfolio yield when compared to the three months ended June 30, 2021. Also impacting2022 as a result of a higher interest rate environment in 2023. Contributing to this increase was the yield on loans was PPP loans originated underour adjustable and variable rate commercial loan portfolios, which increased 268 basis points largely due to the CARES Act, which have a stated rate of 1% and a yield of 12.02% during the three months endedFederal Reserve increasing short term interest rates by 350 basis points since June 30, 2022. The yield on PPP loans includesAdditionally, 12 basis points of the recognition of PPP loan deferred processing fees, net of deferred origination costs, of $0.5 million. These loans increased the average balance of loans by $20.3 million and generated $0.6 million in income for the second quarter of 2022, causing a 2 basis point increase in the yield on loansinterest-earnings assets can be attributed to the recognition of $3.2 million in accretion of the purchase accounting marks recognized as a result of the Centric acquisition.
The investment portfolio yield increased 26 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $175.1 million as maturities and in the net interest margin. During the second quarter of 2021, PPP loans increased therunoff funded loan growth. The average balance of loans by $429.9interest-bearing deposits with banks decreased from $332.3 million resulting in a 9 basis point increase2022 to $308.4 million in 2023 while the yield on loans and a 10increased 447 basis point increase in the net interest margin. Also impacting the yield on interest-earning assetspoints.
The cost of interest-bearing liabilities increased to 1.88% for the three months ended June 30, 2022 was $1.2 million in interest and loan fees recognized when a nonaccrual loan was paid off during the second quarter. The interest and fees collected on this loan increased the net interest margin for the three months ended June 30, 2022 by 6 basis points.
The cost of interest-bearing liabilities decreased to2023, from 0.22% for the three months ended June 30, 2022, from 0.27% for the same period in 2021,2022, primarily due to a decreasean increase in the cost of savingstime deposits and timesavings deposits. Lower market interest rates resulted in theThe cost of savingsinterest-bearing deposits decreasing 4increased 127 basis points and time deposits decreasing 21short-term borrowings increased 471 basis points in comparison to the same period last year. The increase in cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates on money market and time deposits. Comparing the three months ended June 30, 2023 with the comparable period in 2022, average time deposits increased $576.0 million, or 162.5%, with an increase in the cost of these deposits of 277 basis points. Contributing to the average growth in time deposits was an average of $99.5 million related to the Centric acquisition. Other interest-bearing deposits increased on average $527.6 million, or 10.4%, compared to the three months ended June 30, 2022 and the cost of these deposits increased 131 basis points. The Centric acquisition contributed $341.2 million of the growth in other interest-bearing deposits.
For the three months ended June 30, 2022,2023, changes in interest rates positively impacted net interest income by $3.0$9.3 million when compared with the same period in 2021.2022. The higher yield on loans contributed to interest-earning assets positively impacting net interest income by $2.6$39.1 million, while a decreasean increase in the cost of interest-bearing liabilities positivelynegatively impacted net interest income by $0.4 million.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $2.4 million during the three months ended June 30, 2022, as compared to the same period in 2021. The mix of interest-earning assets resulted in an increase of $2.0 million in interest income while changes in the volume and mix of interest-bearing liabilities decreased interest expense by $0.4 million. Average interest-earning assets for the three months ended June 30, 2022 increased $112.4 million, or 1.3%, compared to the same period in 2021. Average loans for the comparable period increased $264.5 million, or 3.9%.
Net interest income also benefited from a $51.5 million increase in average net free funds at June 30, 2022 as compared to June 30, 2021. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in net free funds was an increase of $106.8 million, or 4.1%, in noninterest-bearing demand deposit average balances. Average time deposits for the three months ended June 30, 2022 decreased by $104.2 million compared to the comparable period in 2021, decreasing interest expense by $0.1$29.8 million.
6469
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $14.9 million during the three months ended June 30, 2023, as compared to the same period in 2022. The mix of interest-earning assets resulted in an increase of $15.5 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $0.6 million. Average interest-earning assets for the three months ended June 30, 2023 increased $1.5 billion, or 16.6%, compared to the same period in 2022. Average loans for the comparable period increased $1.7 billion, or 23.5%.
Net interest income also benefited from a $5.4 million increase in average net free funds at June 30, 2023 as compared to June 30, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The higher level of net free funds was the result of increases in other liabilities and shareholders' equity. Average time deposits for the three months ended June 30, 2023 increased by $576.0 million compared to the comparable period in 2022, increasing interest expense by $0.4 million.
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:
 
2022202120232022
(dollars in thousands) (dollars in thousands)
Interest income per Consolidated Statements of IncomeInterest income per Consolidated Statements of Income$76,728 $72,051 Interest income per Consolidated Statements of Income$131,267 $76,728 
Adjustment to fully taxable equivalent basisAdjustment to fully taxable equivalent basis244 290 Adjustment to fully taxable equivalent basis305 244 
Interest income adjusted to fully taxable equivalent basis (non-GAAP)Interest income adjusted to fully taxable equivalent basis (non-GAAP)76,972 72,341 Interest income adjusted to fully taxable equivalent basis (non-GAAP)131,572 76,972 
Interest expenseInterest expense3,066 3,852 Interest expense33,443 3,066 
Net interest income adjusted to fully taxable equivalent basis (non-GAAP)Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$73,906 $68,489 Net interest income adjusted to fully taxable equivalent basis (non-GAAP)$98,129 $73,906 


6570
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:
 
20222021 20232022
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)
AssetsAssetsAssets
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Interest-bearing deposits with banksInterest-bearing deposits with banks$332,269 $658 0.79 %$358,595 $90 0.10 %Interest-bearing deposits with banks$308,412 $4,043 5.26 %$332,269 $658 0.79 %
Tax-free investment securitiesTax-free investment securities23,120 152 2.64 29,385 195 2.66 Tax-free investment securities21,564 144 2.68 23,120 152 2.64 
Taxable investment securitiesTaxable investment securities1,378,737 6,435 1.87 1,498,204 6,440 1.72 Taxable investment securities1,205,160 6,416 2.14 1,378,737 6,435 1.87 
Loans and leases, net of unearned income (b)(c)Loans and leases, net of unearned income (b)(c)7,036,176 69,727 3.97 6,771,722 65,616 3.89 Loans and leases, net of unearned income (b)(c)8,689,021 120,969 5.58 7,036,176 69,727 3.97 
Total interest-earning assetsTotal interest-earning assets8,770,302 76,972 3.52 8,657,906 72,341 3.35 Total interest-earning assets10,224,157 131,572 5.16 8,770,302 76,972 3.52 
Noninterest-earning assets:Noninterest-earning assets:Noninterest-earning assets:
CashCash119,999 93,627 Cash108,596 119,999 
Allowance for credit lossesAllowance for credit losses(92,720)(102,303)Allowance for credit losses(134,750)(92,720)
Other assetsOther assets802,888 802,453 Other assets958,910 802,888 
Total noninterest-earning assetsTotal noninterest-earning assets830,167 793,777 Total noninterest-earning assets932,756 830,167 
Total AssetsTotal Assets$9,600,469 $9,451,683 Total Assets$11,156,913 $9,600,469 
Liabilities and Shareholders’ EquityLiabilities and Shareholders’ EquityLiabilities and Shareholders’ Equity
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing demand deposits (d)Interest-bearing demand deposits (d)$1,631,353 $113 0.03 %$1,560,713 $112 0.03 %Interest-bearing demand deposits (d)$2,045,853 $6,637 1.30 %$1,631,353 $113 0.03 %
Savings deposits (d)Savings deposits (d)3,436,339 457 0.05 3,297,818 779 0.09 Savings deposits (d)3,549,483 12,228 1.38 3,436,339 457 0.05 
Time depositsTime deposits354,403 227 0.26 458,638 541 0.47 Time deposits930,447 7,036 3.03 354,403 227 0.26 
Short-term borrowingsShort-term borrowings95,561 18 0.08 114,966 27 0.09 Short-term borrowings434,783 5,193 4.79 95,561 18 0.08 
Long-term debtLong-term debt181,859 2,251 4.96 206,495 2,393 4.65 Long-term debt187,379 2,349 5.03 181,859 2,251 4.96 
Total interest-bearing liabilitiesTotal interest-bearing liabilities5,699,515 3,066 0.22 5,638,630 3,852 0.27 Total interest-bearing liabilities7,147,945 33,443 1.88 5,699,515 3,066 0.22 
Noninterest-bearing liabilities and shareholders’ equity:Noninterest-bearing liabilities and shareholders’ equity:Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits (d)Noninterest-bearing demand deposits (d)2,711,458 2,604,695 Noninterest-bearing demand deposits (d)2,580,842 2,711,458 
Other liabilitiesOther liabilities125,646 110,264 Other liabilities193,292 125,646 
Shareholders’ equityShareholders’ equity1,063,850 1,098,094 Shareholders’ equity1,234,834 1,063,850 
Total noninterest-bearing funding sourcesTotal noninterest-bearing funding sources3,900,954 3,813,053 Total noninterest-bearing funding sources4,008,968 3,900,954 
Total Liabilities and Shareholders’ EquityTotal Liabilities and Shareholders’ Equity$9,600,469 $9,451,683 Total Liabilities and Shareholders’ Equity$11,156,913 $9,600,469 
Net Interest Income and Net Yield on Interest-Earning AssetsNet Interest Income and Net Yield on Interest-Earning Assets$73,906 3.38 %$68,489 3.17 %Net Interest Income and Net Yield on Interest-Earning Assets$98,129 3.85 %$73,906 3.38 %
(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, 20222023 and 2021.2022.
(b)Loan balances include held for sale and nonaccrual loans. Income on nonaccrual loans is accounted for on the cash basis.
(c)Loan income includes loan fees earned.
(d)Average balances do not include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.

 
6671
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, 20222023 compared with June 30, 2021:2022:
 
Analysis of Year-to-Year Changes in Net Interest Income Analysis of Year-to-Year Changes in Net Interest Income
Total
Change		Change Due To
Volume		Change Due To
Rate (a)		 Total
Change		Change Due To
Volume		Change Due To
Rate (a)
(dollars in thousands) (dollars in thousands)
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Interest-bearing deposits with banksInterest-bearing deposits with banks$568 $(7)$575 Interest-bearing deposits with banks$3,385 $(47)$3,432 
Tax-free investment securitiesTax-free investment securities(43)(42)(1)Tax-free investment securities(8)(10)2 
Taxable investment securitiesTaxable investment securities(5)(512)507 Taxable investment securities(19)(809)790 
Loans and leasesLoans and leases4,111 2,565 1,546 Loans and leases51,242 16,360 34,882 
Total interest income (b)Total interest income (b)4,631 2,004 2,627 Total interest income (b)54,600 15,494 39,106 
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing demand depositsInterest-bearing demand deposits1 5 (4)Interest-bearing demand deposits6,524 31 6,493 
Savings depositsSavings deposits(322)31 (353)Savings deposits11,771 14 11,757 
Time depositsTime deposits(314)(122)(192)Time deposits6,809 373 6,436 
Short-term borrowingsShort-term borrowings(9)(4)(5)Short-term borrowings5,175 68 5,107 
Long-term debtLong-term debt(142)(286)144 Long-term debt98 68 30 
Total interest expenseTotal interest expense(786)(376)(410)Total interest expense30,377 554 29,823 
Net interest incomeNet interest income$5,417 $2,380 $3,037 Net interest income$24,223 $14,940 $9,283 
 
(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.
 
6772
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: 
2022202120232022
DollarsPercentageDollarsPercentageDollarsPercentageDollarsPercentage
(dollars in thousands)(dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$1,698 43 %$3,449 82 %Commercial, financial, agricultural and other$2,260 71 %$1,698 43 %
Time and demandTime and demand1,128 29 3,450 82 Time and demand1,103 35 1,128 29 
Commercial credit cardsCommercial credit cards78 2 (1)— Commercial credit cards(7)— 78 2 
Equipment financeEquipment finance241 6 Equipment finance613 19 241 6 
Time and demand otherTime and demand other251 6 Time and demand other551 17 251 6 
Real estate constructionReal estate construction599 15 129 3 Real estate construction(221)(7)599 15 
Construction otherConstruction other425 11 Construction other254 8 425 11 
Construction residentialConstruction residential174 4 Construction residential(475)(15)174 4 
Residential real estateResidential real estate993 25 (56)(1)Residential real estate935 29 993 25 
Residential first lienResidential first lien718 18 21 1 Residential first lien723 22 718 18 
Residential junior lien/home equityResidential junior lien/home equity275 7 (77)(2)Residential junior lien/home equity212 7 275 7 
Commercial real estateCommercial real estate(1,770)(45)(1,867)(45)Commercial real estate(685)(21)(1,770)(45)
MultifamilyMultifamily356 9 128 3 Multifamily234 8 356 9 
Nonowner occupiedNonowner occupied(2,178)(55)(972)(23)Nonowner occupied72 2 (2,178)(55)
Owner occupiedOwner occupied52 1 (1,023)(25)Owner occupied(991)(31)52 1 
Loans to individualsLoans to individuals2,423 62 2,547 61 Loans to individuals911 28 2,423 62 
Automobile and recreational vehiclesAutomobile and recreational vehicles2,065 53 2,404 57 Automobile and recreational vehicles717 22 2,065 53 
Consumer credit cardsConsumer credit cards40 1 (107)(2)Consumer credit cards57 2 40 1 
Consumer otherConsumer other318 8 250 6 Consumer other137 4 318 8 
Provision for credit losses on loans and leasesProvision for credit losses on loans and leases$3,943 100 %$4,202 100 %Provision for credit losses on loans and leases$3,200 100 %$3,943 100 %
Provision for off-balance sheet credit exposureProvision for off-balance sheet credit exposure156 1,211 Provision for off-balance sheet credit exposure(410)156 
Total provision for credit lossesTotal provision for credit losses$4,099 $5,413 Total provision for credit losses$2,790 $4,099 

The provision for credit losses on loans and leases for the three months ended June 30, 20222023 decreased in comparison to the three months ended June 30, 20212022 by $0.3$0.7 million. The level of provision expense in the second quarter of 20222023 is primarily the result of an increase in loan balances.balances as well as changes in the economic forecasts used in calculation of the allowance for credit losses. The provision for off-balance sheet credit exposure decreased $1.1$0.6 million primarily due to the level of unfunded commitments. Net charge-offs for the three months ended June 30, 20222023 were $1.5 million.$8.7 million, of which $7.1 million related to loans acquired from Centric for which an allowance for credit losses was established as part of the purchase accounting marks.
The level of provision expense in the second quarter of 20212022 was primarily due to a $3.6 million charge-off related to one commercial borrower and $1.2 million related to reserves for off-balance sheet commitments.the result of increases in loan balances. Net charge-offs for the three months ended June 30, 20212022 were $3.9$1.5 million.


68
73
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, 20222023 and 20212022 and the year-ended December 31, 2021:2022:
 
June 30, 2022June 30, 2021December 31, 2021June 30, 2023June 30, 2022December 31, 2022
(dollars in thousands) (dollars in thousands)
Balance, beginning of periodBalance, beginning of period$91,188 $96,763 $101,309 Balance, beginning of period$133,885 $91,188 $92,522 
Day 1 allowance for credit loss on PCD acquired loansDay 1 allowance for credit loss on PCD acquired loans5,126 — — 
Loans charged off:Loans charged off:Loans charged off:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other509 3,887 7,020 Commercial, financial, agricultural and other6,677 509 2,361 
Real estate constructionReal estate construction— — 9 Real estate construction— — — 
Residential real estateResidential real estate5 14 309 Residential real estate1 5 339 
Commercial real estateCommercial real estate552 7 1,659 Commercial real estate1,517 552 2,487 
Loans to individualsLoans to individuals1,040 931 4,061 Loans to individuals1,148 1,040 4,658 
Total loans charged offTotal loans charged off2,106 4,839 13,058 Total loans charged off9,343 2,106 9,845 
Recoveries of loans previously charged off:Recoveries of loans previously charged off:Recoveries of loans previously charged off:
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other79 103 2,430 Commercial, financial, agricultural and other95 79 394 
Real estate constructionReal estate construction— 135 155 Real estate construction— — 9 
Residential real estateResidential real estate31 174 468 Residential real estate33 31 187 
Commercial real estateCommercial real estate5 1 135 Commercial real estate94 5 769 
Loans to individualsLoans to individuals463 499 1,460 Loans to individuals456 463 1,349 
Total recoveriesTotal recoveries578 912 4,648 Total recoveries678 578 2,708 
Net charge-offsNet charge-offs1,528 3,927 8,410 Net charge-offs8,665 1,528 7,137 
Provision for credit losses on loans charged to expenseProvision for credit losses on loans charged to expense3,943 4,202 (377)Provision for credit losses on loans charged to expense3,200 3,943 17,521 
Balance, end of periodBalance, end of period$93,603 $97,038 $92,522 Balance, end of period$133,546 $93,603 $102,906 

Noninterest Income
The following table presents the components of noninterest income for the three months ended June 30: 
20222021$ Change% Change20232022$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Income:Noninterest Income:Noninterest Income:
Trust incomeTrust income$2,573 $2,706 $(133)(5)%Trust income$2,532 $2,573 $(41)(2)%
Service charges on deposit accountsService charges on deposit accounts4,886 4,310 576 13 Service charges on deposit accounts5,324 4,886 438 9 
Insurance and retail brokerage commissionsInsurance and retail brokerage commissions2,486 1,978 508 26 Insurance and retail brokerage commissions2,314 2,486 (172)(7)
Income from bank owned life insuranceIncome from bank owned life insurance1,383 1,509 (126)(8)Income from bank owned life insurance1,195 1,383 (188)(14)
Card-related interchange incomeCard-related interchange income7,137 7,406 (269)(4)Card-related interchange income7,372 7,137 235 3 
Swap fee incomeSwap fee income1,154 1,252 (98)(8)Swap fee income332 1,154 (822)(71)
Other incomeOther income2,188 1,997 191 10 Other income2,229 2,188 41 2 
SubtotalSubtotal21,807 21,158 649 3 Subtotal21,298 21,807 (509)(2)
Net securities gains— 10 (10)(100)
Gain on sale of mortgage loansGain on sale of mortgage loans1,561 3,084 (1,523)(49)Gain on sale of mortgage loans1,253 1,561 (308)(20)
Gain on sale of other loans and assetsGain on sale of other loans and assets1,099 2,111 (1,012)(48)Gain on sale of other loans and assets1,891 1,099 792 72 
Derivatives mark to marketDerivatives mark to market42 (277)319 (115)Derivatives mark to market81 42 39 93 
Total noninterest incomeTotal noninterest income$24,509 $26,086 $(1,577)(6)%Total noninterest income$24,523 $24,509 $14 — %

Total noninterest income for the three months ended June 30, 2022 decreased $1.6 million, or 6%, in comparison2023 is comparable to the three months ended June 30, 2021.2022. The most significant changes include a $1.5$0.3 million decrease in gain on sale of mortgage loans due to changes in the volume and spreads on mortgage loans sold and a $1.0$0.8 million decreaseincrease in gain on sale of other loans and assets due to a decreasean increase in the volume of SBA loans sold during the quarter. Swap fee income decreased $0.8 million due to a lower volume of interest rate swaps entered into by our commercial loan customers. Additionally, service charges on deposits increased $0.6$0.4 million due to growth in customer accounts and transactions.
6974
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Noninterest Expense
The following table presents the components of noninterest expense for the three months ended June 30:
 
20222021$ Change% Change20232022$ Change% Change
(dollars in thousands) (dollars in thousands)
Noninterest Expense:Noninterest Expense:Noninterest Expense:
Salaries and employee benefitsSalaries and employee benefits$30,949 $28,347 $2,602 9 %Salaries and employee benefits$36,735 $30,949 $5,786 19 %
Net occupancyNet occupancy4,170 3,881 289 7 Net occupancy4,784 4,170 614 15 
Furniture and equipmentFurniture and equipment3,857 3,866 (9)— Furniture and equipment4,284 3,857 427 11 
Data processingData processing3,470 3,192 278 9 Data processing3,763 3,470 293 8 
Advertising and promotionAdvertising and promotion1,434 1,355 79 6 Advertising and promotion1,327 1,434 (107)(7)
Pennsylvania shares taxPennsylvania shares tax913 1,258 (345)(27)Pennsylvania shares tax1,173 913 260 28 
Intangible amortizationIntangible amortization862 863 (1)— Intangible amortization1,282 862 420 49 
Other professional fees and servicesOther professional fees and services1,197 1,091 106 10 Other professional fees and services1,182 1,197 (15)(1)
FDIC insuranceFDIC insurance702 438 264 60 FDIC insurance1,277 702 575 82 
Other operatingOther operating7,550 6,442 1,108 17 Other operating9,296 7,410 1,886 25 
SubtotalSubtotal55,104 50,733 4,371 9 Subtotal65,103 54,964 10,139 18 
Loss on sale or write-down of assetsLoss on sale or write-down of assets86 43 43 100 Loss on sale or write-down of assets6 86 (80)(93)
Merger and acquisition relatedMerger and acquisition related(60)— (60)N/A
COVID-19 related62 232 (170)(73)
Branch consolidation(202)(22)(180)818 
Litigation and operational lossesLitigation and operational losses629 556 73 13 Litigation and operational losses894 629 265 42 
Total noninterest expenseTotal noninterest expense$55,679 $51,542 $4,137 8 %Total noninterest expense$65,943 $55,679 $10,264 18 %

Noninterest expense increased $4.1$10.3 million, or 8%18%, for the three months ended June 30, 20222023 compared to the same period in 2021.2022. The increase is a result of a $2.6$5.8 million increase in salary and employee benefit expense, primarily due to annual merit increases,a $1.8 million increase in hospitalization expense as well as the impact of 74 additional full-time equivalent employees, largely due to the Centric acquisition. Net occupancy expense increased $0.6 million, of which $0.5 million is related to the Centric acquisition. The higher incentiveintangible amortization expense and numberis related to amortization of employees.Centric's core deposit intangible. Also contributing to the increasehigher noninterest expense is a $1.1$1.9 million increase in other operating expenses due to increased printing and postage related to customer compliance mailings as well as several other expense categories, includingsuch as credit reporting travel and operational losses,meals and travel, none of which were individually significant. Data processing increased $0.3 million due to investments in additional digital and product solutions.
FDIC insurance increased $0.6 million due to both the impact of Centric as well as a 2 basis point increase in the FDIC deposit insurance assessment rate which began in the first quarterly assessment period of 2023.
Income Tax
The provision for income taxes decreased $0.1increased $3.19 million for the three months ended June 30, 2022,2023, compared to the corresponding period in 2021.2022.  The effective tax rate decreased 80increased 30 basis points from 20.7%19.9% for the three months endedJune 30, 2022 to 20.2% for the three months ended June 30, 2021 to 19.9% for the three months ended June 30, 2022.2023.
We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the three months ended June 30, 20222023 and 2021.2022.
Liquidity
Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs with cost-effective funding. We generate funds to meet these needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first six months of 2022,2023, the maturity and redemption of investment securities provided $136.9$100.4 million in liquidity. These funds contributed to the liquidity used to originate loans, and purchase investment securities and fund depositor withdrawals.
We also have available unused wholesale sources of liquidity, including overnight federal funds and repurchase agreements, advances from the FHLB of Pittsburgh, borrowings through the discount window at the Federal Reserve Bank of Cleveland (“FRB”) and access to certificates of deposit through brokers.
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, 2022, our maximum borrowing capacity under this program was $1.4 billion, and as of that date there was $5.8 million outstanding with an average weighted rate of 0.57% and an average original term of 341 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


An additional sourceThe following represents our expanded sources of liquidity as of June 30, 2023:
Total AvailableAmount UsedOutstanding Letters of CreditNet Available
(dollars in thousands)
Internal liquidity sources
Unencumbered securities$594,152 $— $— $594,152 
Other (excess pledged)34,132 — — 34,132 
External liquidity sources
FHLB advances2,432,168 494,495 659,250 1,278,423 
FRB borrowings1,071,028 — — 1,071,028 
Lines with other financial institutions160,000 — — 160,000 
Brokered deposits (1)
1,128,932 16,683 — 1,112,249 
Total liquidity$5,585,412 $511,178 $659,250 $4,414,984 
(1) Reflects internal policy limit. Maximum capacity with CDARs is $1.7 billion.
The brokered deposits included in the table above are a result of our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of June 30, 2023, the outstanding balance of $16.7 million carried an average weighted rate of 3.91% and an average original term of 219 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.
Liquidity available through the Federal Reserve is a result of the FRB Borrower-in-Custody of Collateral program, which enables us to take certain loans that are not being used as collateral at the FHLB and pledge them as collateral for borrowings at the FRB. At
During the six months ended June 30, 2022,2023, the borrowing capacity under this program totaled $1.1 billion and there was no balance outstanding. AsCompany increased its liquidity by purchasing $659.3 million in letters of June 30, 2022, our maximum borrowing capacity atcredit from the FHLB of Pittsburgh, was $1.9 billion and aswhich were then used to secure public deposits. This resulted in a similar amount of that date amounts used against this capacity included $5.2previously pledged securities becoming unencumbered. Additionally, new short-term borrowings in the amount of $250.0 million were entered into in outstanding borrowings and no outstanding letters of credit.
We also have available unused federal funds lines with four correspondent banks. These lines have an aggregate commitment of $160.0 million with no outstanding balance as of June 30, 2022. In addition, we have available unused repo lines with two correspondent banks. These lines have an aggregate commitment of $400.0 million with no outstanding balance as of June 30, 2022.
First Commonwealth Financial Corporation has an unsecured $20.0 million line of credit with another financial institution. As of June 30, 2022, there are no amounts outstanding on this line.order to provide additional on-balance sheet liquidity.
First Commonwealth’s long-term liquidity source is its core deposit base. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. The following table shows a breakdown of the components of First Commonwealth’s deposits: 
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands) (dollars in thousands)
Noninterest-bearing demand deposits(a)
Noninterest-bearing demand deposits(a)
$2,726,242 $2,658,782 
Noninterest-bearing demand deposits(a)
$2,624,344 $2,670,508 
Interest-bearing demand deposits(a)
Interest-bearing demand deposits(a)
273,360 291,476 
Interest-bearing demand deposits(a)
611,156 357,769 
Savings deposits(a)
Savings deposits(a)
4,708,868 4,647,197 
Savings deposits(a)
4,935,124 4,572,183 
Time depositsTime deposits345,075 385,043 Time deposits975,654 405,009 
TotalTotal$8,053,545 $7,982,498 Total$9,146,278 $8,005,469 
(a)Balances include reallocations from noninterest-bearing demand deposits and interest-bearing demand deposits into savings deposits, which were made for regulatory purposes.
The level of deposits during any period is influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds.
During the first six months of 2022,2023, total deposits increased $71.0 million.$1.1 billion, of which $757.0 million were acquired as part of the Centric acquisition. Interest-bearing demand and savings deposits increased $43.6$616.3 million, noninterest-bearing demand deposits increased $67.5decreased $46.2 million and time deposits decreased $40.0increased $570.6 million.
The estimated total of uninsured deposits was $2.4 billion at June 30, 2023 and $2.1 billion at December 31, 2022. Additionally, $0.9 billion of uninsured deposits are secured by pledged investment securities or letters of credit. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.
76
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Market Risk
The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate-sensitive assets to rate-sensitive liabilities repricing within a one-year period was 0.780.58 and 0.840.76 at June 30, 20222023 and December 31, 2021,2022, respectively. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.
Gap analysis has limitations due to the static nature of the model that holds volumes and consumer behaviors constant in all economic and interest rate scenarios. A lower level of rate sensitive assets to rate sensitive liabilities repricing in one year could indicate reduced net interest income in a rising interest rate scenario, and conversely, increased net interest income in a declining interest rate scenario. However, the gap analysis incorporates only the level of interest-earning assets and interest-bearing liabilities and not the sensitivity each has to changes in interest rates. The impact of the sensitivity to changes in interest rates is provided in the table below the gap analysis.
The following is the gap analysis as of June 30, 2023 and December 31, 2022: 
 June 30, 2023
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans and leases$2,097,822 $548,511 $841,436 $3,487,769 $3,869,780 $1,369,836 
Investments44,693 38,091 72,656 155,440 439,678 716,680 
Other interest-earning assets325,691 — — 325,691 83 — 
Total interest-sensitive assets (ISA)2,468,206 586,602 914,092 3,968,900 4,309,541 2,086,516 
Certificates of deposit65,541 218,076 350,610 634,227 340,425 962 
Other deposits5,546,280 — — 5,546,280 — — 
Borrowings671,811 205 411 672,427 53,219 455 
Total interest-sensitive liabilities (ISL)6,283,632 218,281 351,021 6,852,934 393,644 1,417 
Gap$(3,815,426)$368,321 $563,071 $(2,884,034)$3,915,897 $2,085,099 
ISA/ISL0.39 2.69 2.60 0.58 10.95 1,472.49 
Gap/Total assets33.70 %3.25 %4.97 %25.48 %34.60 %18.42 %

 December 31, 2022
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans and leases$3,164,495 $354,556 $575,640 $4,094,691 $2,498,042 $978,319 
Investments46,426 35,579 74,962 156,967 461,699 734,221 
Other interest-earning assets29,919 — — 29,919 71 — 
Total interest-sensitive assets (ISA)3,240,840 390,135 650,602 4,281,577 2,959,812 1,712,540 
Certificates of deposit71,976 56,539 102,037 230,552 173,810 955 
Other deposits4,929,952 — — 4,929,952 — — 
Borrowings445,065 50,204 407 495,676 3,256 50,791 
Total interest-sensitive liabilities (ISL)5,446,993 106,743 102,444 5,656,180 177,066 51,746 
Gap$(2,206,153)$283,392 $548,158 $(1,374,603)$2,782,746 $1,660,794 
ISA/ISL0.59 3.65 6.35 0.76 16.72 33.10 
Gap/Total assets22.50 %2.89 %5.59 %14.02 %28.38 %16.94 %

71
77
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, 2022 and December 31, 2021: 
 June 30, 2022
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans and leases$2,967,901 $365,052 $553,815 $3,886,768 $2,276,987 $884,162 
Investments46,587 39,740 76,585 162,912 493,687 784,626 
Other interest-earning assets179,533 — — 179,533 — — 
Total interest-sensitive assets (ISA)3,194,021 404,792 630,400 4,229,213 2,770,674 1,668,788 
Certificates of deposit93,037 64,773 90,963 248,773 95,113 1,179 
Other deposits4,982,228 — — 4,982,228 — — 
Borrowings161,292 202 50,403 211,897 3,226 51,188 
Total interest-sensitive liabilities (ISL)5,236,557 64,975 141,366 5,442,898 98,339 52,367 
Gap$(2,042,536)$339,817 $489,034 $(1,213,685)$2,672,335 $1,616,421 
ISA/ISL0.61 6.23 4.46 0.78 28.17 31.87 
Gap/Total assets21.44 %3.57 %5.13 %12.74 %28.05 %16.97 %

 December 31, 2021
 0-90 Days91-180
Days		181-365
Days		Cumulative
0-365 Days		Over 1 Year
Through 5
Years		Over 5
Years
 (dollars in thousands)
Loans$2,910,172 $394,048 $606,468 $3,910,688 $2,296,873 $555,022 
Investments98,969 82,267 154,316 335,552 725,576 516,766 
Other interest-earning assets310,629 — — 310,629 — — 
Total interest-sensitive assets (ISA)3,319,770 476,315 760,784 4,556,869 3,022,449 1,071,788 
Certificates of deposit97,269 72,453 106,243 275,965 107,795 1,232 
Other deposits4,938,673 — — 4,938,673 — — 
Borrowings210,682 200 400 211,282 53,197 51,577 
Total interest-sensitive liabilities (ISL)5,246,624 72,653 106,643 5,425,920 160,992 52,809 
Gap$(1,926,854)$403,662 $654,141 $(869,051)$2,861,457 $1,018,979 
ISA/ISL0.63 6.56 7.13 0.84 18.77 20.30 
Gap/Total assets20.19 %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, 2022 ($)$(13,582)$(6,238)$5,712 $11,131 
June 30, 2022 (%)(4.22)%(1.94)%1.77 %3.46 %
December 31, 2021 ($)$(9,008)$(4,976)$5,956 $10,224 
December 31, 2021 (%)(3.25)%(1.79)%2.15 %3.69 %
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
June 30, 2023 ($)$(3,776)$(1,380)$2,316 $3,817 
June 30, 2023 (%)(0.91)%(0.33)%0.56 %0.92 %
December 31, 2022 ($)$(11,973)$(5,486)$5,902 $11,413 
December 31, 2022 (%)(3.12)%(1.43)%1.54 %2.98 %
The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.
 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
June 30, 2022 ($)$(43,506)$(22,987)$17,599 $34,084 
June 30, 2022 (%)(13.50)%(7.14)%5.46 %10.58 %
December 31, 2021 ($)$(26,120)$(17,640)$13,867 $29,192 
December 31, 2021 (%)(9.42)%(6.36)%5.00 %10.53 %
 Net interest income change (12 months) for basis point movements of:
 -200-100+100+200
 (dollars in thousands)
June 30, 2023 ($)$(20,993)$(8,422)$7,560 $13,136 
June 30, 2023 (%)(5.07)%(2.03)%1.83 %3.17 %
December 31, 2022 ($)$(45,361)$(20,166)$18,626 $36,011 
December 31, 2022 (%)(11.83)%(5.26)%4.86 %9.39 %
The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment. Results of the 100 and 200 basis point interest rate decline scenario are affected by the fact that many of our interest-bearing liabilities are at rates below 1%, with an assumed floor of zero in the model. In the six months ended June 30, 20222023 and 2021,2022, the cost of our interest-bearing liabilities averaged 0.22%1.59% and 0.31%0.22%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 3.43%5.02% and 3.49%3.43%, 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 $8.8$7.8 million at June 30, 20222023 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 months of 2022, two loans totaling $0.1 million were identified as troubled debt restructurings.
The balance of troubled debt restructured loans decreased $4.2 million from December 31, 2021. Changes during the first six months of 2022 can be attributed to the pay off and paydown of troubled debt loans, $2.9 million of which relates to the paydown of one commercial real estate relationship. Please refer to Note 7 “Loans and Allowance for Credit Losses,” for additional information on troubled debt restructurings.

We discontinue interest accruals on a loan when, based on current information and events, it is probable that we will be unable to fully collect principal or interest due according to the contractual terms of the loan. A loan is also placed on nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


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
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


present value of projected future cash flows. Losses or a specifically assigned allowance for loan losses are recognized where appropriate.
Nonperforming loans and leases, including loans held for sale, decreased $19.5increased $12.5 million to $35.7$48.0 million at June 30, 20222023, compared to $55.2$35.5 million at December 31, 2021. During the six months ended June 30, 2022,2022. The increase in nonperforming loans is primarily a $14.5result of $18.7 million commercial real estate loan was removedin loans acquired from nonaccrual status and paid off in full. In addition, the aforementioned paydown on troubled debt restructured loans also decreased the balance of nonaccrual loans by $2.9 million. During the same period $1.6Centric as well as an additional $1.8 million of loans were moved to nonaccrual.nonaccrual during the first half of 2023. Offsetting this is the removal of $6.4 million in accruing TDR's. The TDR's were eliminated as a result of our adoption of ASU 2022-02. The adoption of this guidance was effective January 1, 2023.
The allowance for credit losses as a percentage of nonperforming loans was 262.25%278.17% as of June 30, 2022,2023, compared to 167.67%289.98% at December 31, 2021,2022, and 183.81%262.25% at June 30, 2021.2022. The amount of individually assessed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals and updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of $0.4$13.1 million and general reserves of $93.2$120.4 million as of June 30, 2022.2023. Specific reserves decreased $35 thousandincreased $12.4 million from December 31, 2021,2022, and $2.6$12.7 million from June 30, 2021. The decrease2022 primarily as a result of individually analyzed PCD loans acquired 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, 2022.Centric.
Criticized loans totaled $146.8$207.1 million at June 30, 20222023 and represented 2% of the loan portfolio. The level of criticized loans decreasedincreased as of June 30, 20222023 when compared to December 31, 2021,2022, by $51.3$74.2 million, or 26%56%. Classified loans totaled $49.8$76.4 million at June 30, 20222023 compared to $77.6$44.4 million at December 31, 2021, a decrease2022, an increase of $27.8$32.0 million, or 36%72%. The decreaseincrease in criticized loans is the result of $67.2 million in criticized loans acquired as part of the aforementioned changes in nonperforming loans as well as credit upgrades on borrowers, primarily in the hospitality sector.Centric acquisition.
The allowance for credit losses was $93.6$133.5 million at June 30, 2022,2023, or 1.31%1.52% of total loans and leases outstanding, compared to 1.35% reported at December 31, 2021,2022, and 1.44%1.31% at June 30, 2021.2022. General reserves, or the portion of the allowance related to loans that were not specifically evaluated, as a percentage of performing loans were 1.38% at June 30, 2023 compared to 1.34% at December 31, 2022 and 1.31% at June 30, 2022 compared to 1.36% at December 31, 2021 and 1.41% at June 30, 2021. The decrease in the percentage of general reserve from December 31, 2021 and June 30, 2021 are reflective of lower unemployment rates utilized to forecast future loan losses at June 30, 2022 and lower qualitative reserves related to industries impacted by COVID-19.2022.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


The following table provides information related to nonperforming assets, the allowance for credit losses and other credit-related measurements:
June 30, December 31, 2021  June 30, December 31, 2022 
2022 2021  2023 2022 
(dollars in thousands)  (dollars in thousands) 
Nonperforming Loans:Nonperforming Loans:Nonperforming Loans:
Loans on nonaccrual basisLoans on nonaccrual basis$19,594   $22,219 $34,926   Loans on nonaccrual basis$48,009   $19,594 $20,193   
Troubled debt restructured loans on nonaccrual basisTroubled debt restructured loans on nonaccrual basis9,694   23,981   13,134   Troubled debt restructured loans on nonaccrual basis  9,694   8,852   
Troubled debt restructured loans on accrual basisTroubled debt restructured loans on accrual basis6,404   6,593   7,120   Troubled debt restructured loans on accrual basis  6,404   6,442   
Total nonperforming loansTotal nonperforming loans$35,692   $52,793   $55,180   Total nonperforming loans$48,009   $35,692   $35,487   
Loans past due 30 to 90 days and still accruingLoans past due 30 to 90 days and still accruing$6,655 $5,895 $8,911 Loans past due 30 to 90 days and still accruing$15,693 $6,655 $17,949 
Loans past due in excess of 90 days and still accruingLoans past due in excess of 90 days and still accruing$3,155   $903   $1,606   Loans past due in excess of 90 days and still accruing$2,474   $3,155   $1,991   
Other real estate ownedOther real estate owned$93   $394   $642   Other real estate owned$324   $93   $534   
Loans held for sale at end of periodLoans held for sale at end of period$12,876 $19,530 $18,583 Loans held for sale at end of period$16,300 $12,876 $11,869 
Portfolio loans and leases outstanding at end of periodPortfolio loans and leases outstanding at end of period$7,119,754   $6,740,535 $6,839,230   Portfolio loans and leases outstanding at end of period$8,799,836   $7,119,754 $7,642,143   
Average loans and leases outstandingAverage loans and leases outstanding$6,965,296 (a) $6,776,560 (a) $6,777,192 (b) Average loans and leases outstanding$8,496,305 (a) $6,965,296 (a) $7,172,624 (b) 
Nonperforming loans as a percentage of total loans and leasesNonperforming loans as a percentage of total loans and leases0.50 %0.78 %0.81 %Nonperforming loans as a percentage of total loans and leases0.54 %0.50 %0.46 %
Provision for credit losses on loans and leasesProvision for credit losses on loans and leases$3,743 (a) $2,926 (a) $(377)(b) Provision for credit losses on loans and leases$2,620 (a) $3,743 (a) $17,521 (b) 
Provision for credit losses - acquisition day 1 non-PCDProvision for credit losses - acquisition day 1 non-PCD$10,653 $— $— 
Allowance for credit lossesAllowance for credit losses$93,603   $97,038   $92,522   Allowance for credit losses$133,546   $93,603   $102,906   
Net charge-offsNet charge-offs$2,662 (a) $7,197 (a) $8,410 (b) Net charge-offs$9,838 (a) $2,662 (a) $7,137 (b) 
Net charge-offs as a percentage of average loans and leases outstanding (annualized)Net charge-offs as a percentage of average loans and leases outstanding (annualized)0.08 %0.21 %0.12 %Net charge-offs as a percentage of average loans and leases outstanding (annualized)0.23 %0.08 %0.10 %
Provision for credit losses as a percentage of net charge-offs140.61 %(a) 40.66 %(a) (4.48)%(b) 
Provision for credit losses as a percentage of net charge-offs (e)
Provision for credit losses as a percentage of net charge-offs (e)
26.63 %(a) 140.61 %(a) 245.50 %(b) 
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)1.31 %1.44 %1.35 %Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (c)1.52 %1.31 %1.35 %
Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans (c)1.32 %1.49 %1.37 %
Allowance for credit losses as a percentage of nonperforming loans (d)Allowance for credit losses as a percentage of nonperforming loans (d)262.25 %183.81 %167.67 %Allowance for credit losses as a percentage of nonperforming loans (d)278.17 %262.25 %289.98 %
(a)For the six-month period ended.
(b)For the twelve-month period ended.
(c)Does not include loans held for sale.
(d)Does not include nonperforming loans held for sale.
(e)Does not include provision for credit losses on loans and leases - acquisition day 1 non-PCD
The following tables show the outstanding balances of our loan and lease portfolio and the breakdown of net charge-offs and nonperforming loans, excluding loans held for sale, by loan type as of and for the periods presented:
 
June 30, 2022December 31, 2021 June 30, 2023December 31, 2022
Amount%Amount% Originated
Acquired (1)
Total%Amount%
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$1,170,583 16 %$1,173,452 17 %Commercial, financial, agricultural and other$1,255,627 $246,367 $1,501,994 17 %$1,211,706 16 %
Real estate constructionReal estate construction392,992 6 494,456 7 Real estate construction493,684 81,115 574,799 7 513,101 7 
Residential real estateResidential real estate2,100,201 29 1,920,250 28 Residential real estate2,275,593 88,516 2,364,109 27 2,194,669 29 
Commercial real estateCommercial real estate2,319,094 33 2,251,097 33 Commercial real estate2,470,863 534,099 3,004,962 34 2,425,012 31 
Loans to individualsLoans to individuals1,136,884 16 999,975 15 Loans to individuals1,353,309 663 1,353,972 15 1,297,655 17 
Total loans and leases, net of unearned incomeTotal loans and leases, net of unearned income$7,119,754 100 %$6,839,230 100 %Total loans and leases, net of unearned income$7,849,076 $950,760 $8,799,836 100 %$7,642,143 100 %
(1) Includes loans acquired as part of the Centric acquisition plus day 1 gross up of PCD loans.
During the six months ended June 30, 2022,2023, originated loans and leases increased $280.5$206.9 million, or 4.1%2.7%, compared to balances outstanding at December 31, 2021.
Real estate construction loans decreased $101.52022. As provided in the table above, the acquisition of Centric accounted for $950.8 million or 20.5%, primarily due toof loan growth during the completionfirst quarter of commercial real estate construction projects. Residential real estate grew $180.0 million, or 9.4%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $68.0 million, or 3.0%, primarily due to growth in loans secured2023.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


Excluding the impact of Centric, real estate construction loans decreased $19.4 million, or 3.8%, due to the completion of commercial real estate projects. Residential real estate grew $80.9 million, or 3.7%, primarily due to originations of closed-end 1-4 family mortgage loans. Commercial real estate loans increased $45.9 million, or 1.9%, primarily due to growth in loans secured by nonresidential property due in part to the completion of several construction projects. Loans to individuals increased $136.9$55.7 million, or 13.7%4.3%, primarily due to growth in the indirect auto and recreational vehicle portfolio. Commercial, financial, agricultural and other loans increased $43.9 million, or 3.6%, as a result of growth in the equipment finance portfolio.
As indicated in the table below, commercial real estate, residential real estate and commercial, financial and agricultural and other loans represent a significant portion of the nonperforming loans as of June 30, 2022. See discussions related to the provision for credit losses and loans for more information.2023.
For the Six Months Ended June 30, 2022As of June 30, 2022For the Six Months Ended June 30, 2023As of June 30, 2023
Net
Charge-
offs		% of
Total Net
Charge-offs		Net Charge-
offs as a % of
Average
Loans (annualized)		Nonperforming
Loans		% of Total
Nonperforming
Loans		Nonperforming
Loans as a % of
Total Loans		 Net
Charge-
offs		% of
Total Net
Charge-offs		Net Charge-
offs as a % of
Average
Loans (annualized)		Nonperforming
Loans		% of Total
Nonperforming
Loans		Nonperforming
Loans as a % of
Total Loans
(dollars in thousands) (dollars in thousands)
Commercial, financial, agricultural and otherCommercial, financial, agricultural and other$825 30.99 %0.02 %$3,653 10.23 %0.05 %Commercial, financial, agricultural and other$7,086 72.03 %0.17 %$17,030 35.47 %0.19 %
Real estate constructionReal estate construction— — — — — — Real estate construction— — — — — — 
Residential real estateResidential real estate84 3.16 — 8,638 24.20 0.12 Residential real estate9 0.09 — 7,502 15.63 0.08 
Commercial real estateCommercial real estate533 20.02 0.02 22,963 64.34 0.32 Commercial real estate1,381 14.04 0.03 23,009 47.93 0.26 
Loans to individualsLoans to individuals1,220 45.83 0.04 438 1.23 0.01 Loans to individuals1,362 13.84 0.03 468 0.97 0.01 
Total loans and leases, net of unearned incomeTotal loans and leases, net of unearned income$2,662 100.00 %0.08 %$35,692 100.00 %0.50 %Total loans and leases, net of unearned income$9,838 100.00 %0.23 %$48,009 100.00 %0.54 %
Net charge-offs for the six months ended June 30, 20222023 totaled $2.7$9.8 million, compared to $7.2$2.7 million for the six months ended June 30, 2021.2022. The most significant charge-offs during the six months ended June 30, 20222023 included $1.2$7.6 million in charge-offs related to loans acquired from Centric, of which an allowance for credit losses of $7.1 million was established as a result of purchase accounting marks. Additionally, $1.4 million in charge-offs relate to loans to individuals, primarily indirect auto loans and personal credit lines. See discussions related to the provision for credit losses and loans for more information.

Capital Resources
At June 30, 2022,2023, shareholders’ equity was $1.0$1.2 billion, a decreasean increase of $60.2$180.3 million from December 31, 2021.2022. The decreaseincrease was primarily the result of $141.4 million in stock issued as part of the Centric acquisition, $73.0 million in net income and a $88.3$0.9 million declinedecrease in the fair value of available for sale investments and interest rate swaps, which are reflected in the Other Comprehensive Income component of capital. Other items impacting capital include increases of $58.5 million in net income, $2.9due to $3.0 million in treasury stock sales, $22.2offset by $25.2 million of dividends paid to shareholders and $11.1$10.9 million of common stock repurchases. Cash dividends declared per common share were $0.235$0.245 for the six months ended June 30, 2022 and $0.225 for the six months ended June 30, 2021.2023.
First Commonwealth and First Commonwealth Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on First Commonwealth’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Commonwealth and First Commonwealth Bank must meet specific capital guidelines that involve quantitative measures of First Commonwealth’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. First Commonwealth’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.
Effective January 1, 2015, the Company became subject to the new regulatory risk-based capital rules adopted by the federal banking agencies implementing Basel III. The most significant changes included higher minimum capital requirements, as the minimum Tier I capital ratio increased from 4.0% to 6.0% and a new common equity Tier I capital ratio was established with a minimum level of 4.5%. Additionally, the rules improved the quality of capital by providing stricter eligibility criteria for regulatory capital instruments and provide for a phase-in, beginning January 1, 2016, of a capital conservation buffer of 2.5% of risk-weighted assets. This buffer, which was fully phased-in as of January 1, 2019, provides a requirement to hold common equity Tier 1 capital above the minimum risk-based capital requirements, resulting in an effective common equity Tier I risk-weighted asset minimum ratio of 7.0% on a fully phased-in basis.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the existing treatment for accumulated other comprehensive income, which currently does not affect regulatory capital. The Company elected to retain this treatment, which reduces the volatility of regulatory capital levels.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


During the second quarter of 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in subordinated debt, which under the regulatory rules qualifies as Tier II capital. This subordinated debt issuance increased the total risk-based capital ratio by 160 basis points.
As of June 30, 2022, the Company had $12.9 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, 2022, as we did not utilize the PPP Facility.
In March 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the pandemic. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). The Company adopted CECL effective January 1, 2020 and elected to implement the five-year transition. Regulatory capital levels without the capital benefit at June 30, 20222023 for both First Commonwealth and First Commonwealth Bank would have continued to be greater than the amounts needed to be considered “well capitalized”, as the transition provided a capital benefit of approximately 79 to 1512 basis points.
As of June 30, 2022,2023, First Commonwealth and First Commonwealth Bank met all capital adequacy requirements to which they are subject and were considered well-capitalized under the regulatory rules. To be considered well capitalized, the Company must maintain minimum Total risk-based capital, Tier I risk-based capital, Tier I leverage ratio and Common equity tier I risk-based capital as set forth in the table below:
ActualMinimum Capital RequiredRequired to be Considered Well Capitalized ActualMinimum Capital RequiredRequired to be Considered Well Capitalized
Capital
Amount		RatioCapital
Amount		RatioCapital
Amount		Ratio Capital
Amount		RatioCapital
Amount		RatioCapital
Amount		Ratio
(dollars in thousands) (dollars in thousands)
Total Capital to Risk Weighted AssetsTotal Capital to Risk Weighted AssetsTotal Capital to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$1,106,047 14.64 %$793,170 10.50 %$755,400 10.00 %First Commonwealth Financial Corporation$1,265,211 13.66 %$972,856 10.50 %$926,529 10.00 %
First Commonwealth BankFirst Commonwealth Bank1,053,724 13.98 791,576 10.50 753,882 10.00 First Commonwealth Bank1,184,854 12.81 971,024 10.50 924,784 10.00 
Tier I Capital to Risk Weighted AssetsTier I Capital to Risk Weighted AssetsTier I Capital to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$918,321 12.16 %$642,090 8.50 %$604,320 8.00 %First Commonwealth Financial Corporation$1,065,851 11.50 %$787,550 8.50 %$741,223 8.00 %
First Commonwealth BankFirst Commonwealth Bank865,998 11.49 640,800 8.50 603,106 8.00 First Commonwealth Bank985,494 10.66 786,067 8.50 739,828 8.00 
Tier I Capital to Average AssetsTier I Capital to Average AssetsTier I Capital to Average Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$918,321 9.79 %$375,313 4.00 %$469,141 5.00 %First Commonwealth Financial Corporation$1,065,851 9.77 %$436,416 4.00 %$545,520 5.00 %
First Commonwealth BankFirst Commonwealth Bank865,998 9.26 374,218 4.00 467,772 5.00 First Commonwealth Bank985,494 9.06 434,867 4.00 543,584 5.00 
Common Equity Tier I to Risk Weighted AssetsCommon Equity Tier I to Risk Weighted AssetsCommon Equity Tier I to Risk Weighted Assets
First Commonwealth Financial CorporationFirst Commonwealth Financial Corporation$848,321 11.23 %$528,780 7.00 %$491,010 6.50 %First Commonwealth Financial Corporation$995,851 10.75 %$648,571 7.00 %$602,244 6.50 %
First Commonwealth BankFirst Commonwealth Bank865,998 11.49 527,717 7.00 490,023 6.50 First Commonwealth Bank985,494 10.66 647,349 7.00 601,110 6.50 
On July 26, 2022,25, 2023, First Commonwealth Financial Corporation declared a quarterly dividend of $0.12$0.125 per share payable on August 19, 202218, 2023 to shareholders of record as of August 5, 2022.4, 2023. The timing and amount of future dividends are at the discretion of First Commonwealth's Board of Directors based upon, among other factors, capital levels, asset quality, liquidity and current and projected earnings.
In October 2021, a share repurchase program was authorized by the Board of Directors for up to an additional $25.0 million in shares of the Company's common stock. On April 24, 2023, the Board of Directors authorized a $25 million increase in the share repurchase program. As of June 30, 2022, 1,652,9772023, 2,158,754 common shares had been repurchased under thistheses program at an average price of $14.57$13.21 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 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 Company has elected to apply the practical expedient allowing for a contract modification, due to reference rate reform, to be accounted for as a continuation of the existing contract and does not require contract re-
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES


due to reference rate reform, to be accounted for as a continuation of the existing contract and does not require contract remeasurementmeasurement at the modification date or reassessment of a previous accounting determination.determination. The amendments in the update are effective for all entities between March 12, 2020 and December 31, 2022.2024 (In December 2022, FASB released ASU 2022-06, which extended the original sunset date in ASU 2020-04 from December 31, 2022 to December 31, 2024). The Company has established a cross-functional working group to manage the Company’s transition from LIBOR. Products that utilize LIBOR have been identified and have incorporated enhanced language to accommodate the transition to alternative reference rates and the use of LIBOR has been discontinued as an index for new loans. The Company continuesAll LIBOR based loans were transitioned to evaluate thea new index by June 30, 2023. The impact of the LIBOR transition and adopting the new standard.
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 wouldwill 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.statements.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
Information appearing in Item 2 of this report under the caption “Market Risk” is incorporated by reference in response to this item.
ITEM 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission.
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PART II – OTHER INFORMATION
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

 
ITEM 1.     LEGAL PROCEEDINGS
The information required by this item is set forth in Part I, Item 1, Note 5,6, "Commitments and Contingent Liabilities," which is incorporated herein by reference in response to this item.

ITEM 1A.    RISK FACTORS
There have been no material changes to the risk factors previously disclosed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022, except for the following risk factor.
Risks Related to Recent Events Impacting the Financial Services Industry

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

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


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
On October 26, 2021, a share repurchase program was authorized for up to $25.0 million in shares of the Company's common stock.stock with a $25 million increase in April of 2023. The following table details the amount of shares repurchased under this program in the second quarter of 2022:2023:

Month Ending:Total Number of
Shares
Purchased		Average Price
Paid per Share
(or Unit)		Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs		Maximum Number
of Shares that
May Yet Be
Purchased Under
the Plans or
Programs*
April 30, 2022— $— — 1,481,104 
May 31, 2022145,903 13.62 145,903 1,283,185 
June 30, 2022569,404 13.47 569,404 768,125 
Total715,307 $13.50 715,307 
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $13.48 at April 30, 2022, $14.01 at May 31, 2022 and $13.42 at June 30, 2022.
Month Ending:Total Number of
Shares
Purchased		Average Price
Paid per Share
(or Unit)		Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs		Maximum Number
of Shares that
May Yet Be
Purchased Under
the Plans or
Programs*
April 30, 2023— $— — 2,451,451 
May 31, 2023766,393 11.92 766,393 1,696,376 
June 30, 2023— — — 1,696,376 
Total766,393 $11.92 766,393 
* Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $12.48 at April 30, 2023, $12.65 at May 31, 2023 and $12.65 at June 30, 2023.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
    None

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ITEM 4.    MINE SAFETY DISCLOSURES
    Not applicable

ITEM 5.    OTHER INFORMATION
    None
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PART II – OTHER INFORMATION
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
ITEM 6.     EXHIBITS
Exhibit
Number		  Description  Incorporated by Reference to
    Filed herewith
    Filed herewith
    Filed herewith
    Filed herewith
101  The following materials from First Commonwealth Financial Corporation’s Quarterly Report on Form 10-Q, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Consolidated Financial Statements. Note that XBRL tags are embedded within the document.  Filed herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST COMMONWEALTH FINANCIAL CORPORATION
(Registrant)
 
DATED: August 9, 20228, 2023 /s/ T. Michael Price
 
T. Michael Price
President and Chief Executive Officer
DATED: August 9, 20228, 2023 /s/ James R. Reske
 James R. Reske
Executive Vice President, Chief Financial Officer and Treasurer

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