First Commonwealth Financial Corporation

Annual Report 20(cid:21)(cid:20)

(cid:3)

(cid:39)(cid:72)(cid:68)(cid:85)(cid:3)(cid:41)(cid:72)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)

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(cid:42)(cid:88)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:57)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:57)(cid:68)(cid:79)(cid:88)(cid:72)(cid:86)(cid:3)

(cid:40)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:71)(cid:72)(cid:70)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:72)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:178)(cid:3)To improve the financial lives of our neighbors and their 
businesses.(cid:3)(cid:3)

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(cid:58)(cid:68)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86)(cid:17)(cid:3)

(cid:36)(cid:86)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:3)(cid:69)(cid:68)(cid:81)(cid:78)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:79)(cid:76)(cid:87)(cid:72)(cid:85)(cid:68)(cid:70)(cid:92)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:86)(cid:3) 
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(cid:50)(cid:81)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:55)(cid:72)(cid:68)(cid:80)(cid:15)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:78)(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)
(cid:92)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:73)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)(cid:3)(cid:3)

(cid:3)

(cid:3)

(cid:54)(cid:76)(cid:81)(cid:70)(cid:72)(cid:85)(cid:72)(cid:79)(cid:92)(cid:15)(cid:3)(cid:3)

(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:55)(cid:17)(cid:3)(cid:48)(cid:76)(cid:70)(cid:75)(cid:68)(cid:72)(cid:79)(cid:3)(cid:51)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:3)
(cid:3)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

☒

☐

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

For the fiscal year ended December 31, 2021

OR

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

For the transition period from

to

Commission file Number 001-11138
FIRST COMMONWEALTH FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

PENNSYLVANIA
(State or other jurisdiction of incorporation or organization)
601 PHILADELPHIA STREET

25-1428528
(I.R.S. Employer Identification No.)
15701

INDIANA, PA

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (724) 349-7220
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
COMMON STOCK, $1 PAR VALUE

Name of each exchange on which registered
NEW YORK STOCK EXCHANGE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.

Indicate by 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 and posted
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this form 10-K. ¨

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

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth 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 aggregate market value of the voting and non-voting common stock, par value $1 per share, held by non-affiliates of the registrant (based
upon the closing sale price on June 30, 2021) was approximately $1,331,110,247.

The number of shares outstanding of the registrant’s common stock, $1.00 Par Value as of February 25, 2022, was 94,299,094.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the annual meeting of
shareholders to be held April 26, 2022 are incorporated by reference into Part III.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-K
INDEX

PART I

ITEM 1.

Business

ITEM 1A.

Risk Factors

ITEM 1B.

Unresolved Staff Comments

ITEM 2.

Properties

ITEM 3.

Legal Proceedings

ITEM 4.

Mine Safety Disclosures

Executive Officers of First Commonwealth Financial Corporation

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of
Equity Securities

ITEM 6.

[Reserved]

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 8.

Financial Statements and Supplementary Data

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

ITEM 9A.

Controls and Procedures

ITEM 9B.

Other Information

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

ITEM 11.

Executive Compensation

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

ITEM 14.

Principal Accountant Fees and Services

PART IV

ITEM 15.

Exhibits, Financial Statements and Schedules

ITEM 16.

Form 10-K Summary

Signatures

PAGE

4

15

23

23

24

24

25

26

27

28

50

51

117

117

119

120

120

120

121

121

122

123

124

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

Local, regional, national and international economic conditions and the impact they may have on us and our customers and
our assessment of that impact.
Volatility and disruption in national and international financial markets.
Government intervention in the U.S. financial system.
Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs.
Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and
accounting requirements.
The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the
Federal Reserve Board.
Inflation, interest rate, securities market and monetary fluctuations.
The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and
insurance) with which we and our subsidiaries must comply.
The soundness of other financial institutions.
Political instability.
Impairment of our goodwill or other intangible assets.
Acts of God or of war or terrorism.
The timely development and acceptance of new products and services and perceived overall value of these products and
services by users.
Changes in consumer spending, borrowings and savings habits.
Changes in the financial performance and/or condition of our borrowers.
Technological changes.
The cost and effects of cyber incidents or other failures, interruption or security breaches of our systems or those of third-
party providers.
Acquisitions and integration of acquired businesses.
Our ability to increase market share and control expenses.
Our ability to attract and retain qualified employees.
Changes in the competitive environment in our markets and among banking organizations and other financial service
providers.
The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the
Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard
setters.
Changes in the reliability of our vendors, internal control systems or information systems.
Changes in our liquidity position.
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.

3

PART I

ITEM 1.

Overview

Business

First Commonwealth Financial Corporation (“First Commonwealth,” the “Company” or “we”) is a financial holding company
headquartered in Indiana, Pennsylvania. First Commonwealth's subsidiaries include, First Commonwealth Bank ("FCB" or the
"Bank"), First Commonwealth Insurance Agency, Inc. ("FCIA"), FRAMAL and First Commonwealth Financial Advisors,
("FCFA"). We provide a diversified array of consumer and commercial banking services through our bank subsidiary, FCB.
We also provide trust and wealth management services and offer insurance products through FCB and our other operating
subsidiaries. At December 31, 2021, we had total assets of $9.5 billion, total loans of $6.9 billion, total deposits of $8.0 billion
and shareholders’ equity of $1.1 billion. Our principal executive office is located at 601 Philadelphia Street, Indiana,
Pennsylvania 15701, and our telephone number is (724) 349-7220.

FCB is a Pennsylvania bank and trust company. At December 31, 2021, the Bank operated 118 community banking offices
throughout western and central Pennsylvania, and northeastern, central and southwestern Ohio, as well as corporate banking
centers in Pittsburgh, Pennsylvania, and Columbus, Canton and Cleveland, Ohio, and mortgage banking offices in Wexford,
Pennsylvania, and Hudson, Westlake and Lewis Center, Ohio. The Bank also operates a network of 136 automated teller
machines, or ATMs, at various branch offices and offsite locations. All of our ATMs are part of the NYCE and MasterCard/
Cirrus networks, both of which operate nationwide. The Bank is a member of the Allpoint ATM network, which allows
surcharge-free access to over 55,000 ATMs. The Bank is also a member of the “Freedom ATM Alliance,” which affords
cardholders surcharge-free access to a network of over 350 ATMs in over 50 counties in Pennsylvania, Maryland, New York,
and Ohio.

Historical and Recent Developments

FCB began in 1934 as First National Bank of Indiana. First National Bank of Indiana changed its name to National Bank of the
Commonwealth in 1971 and became a subsidiary of First Commonwealth in 1983.

Since the formation of the holding company in 1983, we have grown steadily through the acquisition of smaller banks and
thrifts in our market area, including Deposit Bank in 1984, Dale National Bank and First National Bank of Leechburg in 1985,
Citizens National Bank of Windber in 1986, Peoples Bank and Trust Company in 1990, Central Bank in 1992, Peoples Bank of
Western Pennsylvania in 1993, and Unitas National Bank and Reliable Savings Bank in 1994. In 1995, we merged all of our
banking subsidiaries (other than Reliable Savings Bank) into Deposit Bank and renamed the resulting institution “First
Commonwealth Bank.” We then merged Reliable Savings Bank into FCB in 1997. We acquired Southwest Bank in 1998 and
merged it into FCB in 2002.

We expanded our presence in the Pittsburgh market through the acquisitions of Pittsburgh Savings Bank (dba BankPittsburgh)
in 2003, Great American Federal in 2004 and Laurel Savings Bank in 2006. These acquisitions added 27 branches in
Allegheny and Butler Counties.

In 2015, we expanded into central Ohio through the acquisition of First Community Bank with four branches in the Columbus
area. In 2016, we acquired 13 branches from FirstMerit Bank, National Association, in Canton-Massillon and Ashtabula, Ohio
and in 2017, we acquired DCB Financial Corp ("DCB") and its banking subsidiary The Delaware County Bank and Trust
Company with nine full-service banking offices in the Columbus, Ohio MSA. In 2018, we acquired Garfield Acquisition
Corp., and its banking subsidiary Foundation Bank with five full-service banking offices in the Cincinnati, Ohio area.
Additionally, since 2014, we have expanded our presence in this Ohio market by opening a corporate loan production office in
Columbus, Canton and Cleveland, Ohio, and mortgage loan offices in Hudson, Canfield and Lewis Center, Ohio.

In 2019, we expanded our Pennsylvania markets into State College, Lock Haven, Williamsport and Lewisburg through the
acquisition of 14 branches from Santander Bank, N.A.

We have also focused on organic growth, improving the reach of our franchise and the breadth of our product offering. As part
of this strategy, we have opened fourteen de novo branches since 2005, all of which are in the greater Pittsburgh area. As a
result of our prior acquisitions and de novo strategy, FCB operates 48 branches and a corporate banking center in the Pittsburgh
metropolitan statistical area and currently ranks tenth in deposit market share. In 2021, we announced an initiative to enter the
equipment leasing and finance business. This division is based in suburban Philadelphia and became operational in the first
quarter of 2022.

Our operating objectives include expansion, diversification within our markets, growth of our fee-based income, and growth
internally and through acquisitions of financial institutions, branches, and financial services businesses. We generally seek
merger or acquisition partners that are culturally similar, have experienced management and possess either significant market

4

presence or have potential for improved profitability through financial management, economies of scale and expanded services.
We regularly evaluate merger and acquisition opportunities and, from time to time, conduct due diligence activities related to
possible transactions with other financial institutions and financial services companies. As a result, merger or acquisition
discussions and, in some cases, negotiations, may take place and future merger acquisitions involving cash, debt or equity
securities may occur. Acquisitions typically involve the payment of a premium over book and market values, and, therefore,
some dilution of First Commonwealth’s tangible book value and net income per common share may occur in connection with
any future transaction. Our ability to engage in certain merger or acquisition transactions, whether or not any regulatory
approval is required, will be dependent upon our bank regulators’ views at the time as to our capital levels, quality of
management and our overall condition and their assessment of a variety of other factors. Certain merger or acquisition
transactions, including those involving the acquisition of a depository institution or the assumption of the deposits of any
depository institution, require formal approval from various bank regulatory authorities, which will be subject to a variety of
factors and considerations.

Loan Portfolio

The Company’s loan portfolio includes several categories of loans that are discussed in detail below.

Commercial, Financial, Agricultural and Other

Commercial, financial, agricultural and other loans represent term loans used to acquire business assets or revolving lines of
credit used to finance working capital. These loans are generally secured by a first lien position on the borrower’s business
assets as a secondary source of repayment. The type and amount of the collateral varies depending on the amount and terms of
the loan, but generally may include accounts receivable, inventory, equipment or other assets. Loans also may be supported by
personal guarantees from the principals of the commercial loan borrowers.

Commercial loans are underwritten for credit-worthiness based on the borrowers’ financial information, cash flow, net worth,
prior loan performance, existing debt levels, type of business and the industry in which it operates. Advance rates on
commercial loans are generally collateral-dependent and are determined based on the type of equipment, the mix of inventory
and the quality of receivables.

Credit risk for commercial loans can arise from a borrower’s inability or unwillingness to repay the loan, and in the case of
secured loans, from a shortfall in the collateral value in relation to the outstanding loan balance in the event of a default and
subsequent liquidation of collateral. The Company’s Credit Policy establishes loan concentration limits by borrower, geography
and industry.

Commercial Real Estate

Commercial real estate loans represent term loans secured by owner-occupied and non-owner occupied properties. Commercial
real estate loans are underwritten based on an evaluation of each borrower’s cash flow as the principal source of loan
repayment, and are generally secured by a first lien on the property as a secondary source of repayment. Our underwriting
process for non-owner occupied properties evaluates the history of occupancy, quality of tenants, lease terms, operating
expenses and cash flow. Commercial real estate loans are subject to the same credit evaluation as previously described for
commercial loans. Approximately 18%, by principal amount, of our commercial real estate loans involve owner-occupied
properties.

For loans secured by commercial real estate, at origination the Company obtains current and independent appraisals from
licensed or certified appraisers to assess the value of the underlying collateral. The Company’s general policy for commercial
real estate loans is to limit the terms of the loans to not more than 10 years with loan-to-value ratios not exceeding 80% on
owner-occupied and income producing properties. For non-owner occupied commercial real estate loans, the loan terms are
generally aligned with the property’s lease terms and are generally underwritten with a loan-to-value ratio not exceeding 75%.

Credit risk for commercial real estate loans can arise from economic conditions that could impact market demand, rental rates
and property vacancy rates and declines in the collateral value in relation to the outstanding loan balance in the event of a
default and subsequent liquidation of collateral.

Real Estate Construction

Real estate construction represents financing for real estate development. The underwriting process for these loans is designed
to confirm that the project will be economically feasible and financially viable and is generally conducted as though the
Company would be providing permanent financing for the project. Development and construction loans are secured by the
properties under development or construction, and personal guarantees are typically obtained as a secondary repayment source.

5

The Company considers the financial condition and reputation of the borrower and any guarantors and generally requires a
global cash flow analysis in order to assess the overall financial position of the developer.

Construction loans to residential builders are generally made for the construction of residential homes for which a binding sales
contract exists and for which the prospective buyers have been pre-qualified for permanent mortgage financing by either third-
party lenders or the Company. These loans are generally for a period of time sufficient to complete construction.

Residential construction loans to individuals generally provide for the payment of interest only during the construction phase.
At the end of the construction phase, substantially all of our loans automatically convert to permanent mortgage loans and can
either be retained in our loan portfolio or sold on the secondary market.

Credit risk for real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to
complete the project to specifications and economic conditions that could impact demand for or supply of the property being
constructed.

Residential Real Estate

Residential real estate loans include first lien mortgages used by the borrower to purchase or refinance a principal residence and
home equity loans and lines of credit secured by residential real estate. The Company’s underwriting process for these loans
determines credit-worthiness based upon debt-to-income ratios, collateral values and other relevant factors.

Credit risk for residential real estate loans can arise from a borrower’s inability or unwillingness to repay the loan or a shortfall
in the value of the residential real estate in relation to the outstanding loan balance in the event of a default and subsequent
liquidation of the real estate collateral.

The residential real estate portfolio includes both conforming and non-conforming mortgage loans. Conforming mortgage loans
represent loans originated in accordance with underwriting standards set forth by the government-sponsored entities, including
the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National
Mortgage Association, which serve as the primary purchasers of loans sold in the secondary mortgage market by mortgage
lenders. These loans are generally collateralized by one-to-four-family residential real estate, have loan-to-collateral value ratios
of 80% or less (or have mortgage insurance to insure down to 80%), and are made to borrowers in good credit standing. Non-
conforming mortgage loans represent loans that generally are not saleable in the secondary market to the government-sponsored
entities due to factors such as the credit characteristics of the borrower, the underlying documentation, the loan-to-value ratio,
or the size of the loan. The Company does not offer “subprime,” “interest-only” or “negative amortization” mortgages.

Home equity lines of credit and other home equity loans are originated by the Company for typically up to 90% of the appraised
value, less the amount of any existing prior liens on the property. Additionally, the Company’s credit policy requires borrower
FICO scores of not less than 661 and a debt-to-income ratio of not more than 43%.

Loans to Individuals

The loans to individuals category includes consumer installment loans, personal lines of credit, consumer credit cards and
indirect automobile and recreational vehicle loans. Credit risk for consumer loans can arise from a borrower’s inability or
unwillingness to repay the loan, and in the case of secured loans, by a shortfall in the value of the collateral in relation to the
outstanding loan balance in the event of a default and subsequent liquidation of collateral.

The underwriting criteria for automobile loans generally allows for such loans to be made for up to 100% of the purchase price
or the retail value of the vehicle as listed by the National Automobile Dealers Association. The terms of the loan are determined
by the age and condition of the collateral, and range from 36 to 84 months. Collision insurance policies are required on all
automobile loans. The Company also makes other consumer loans, which may or may not be secured. The terms of secured
consumer loans generally depend upon the nature of the underlying collateral. Unsecured consumer loans and consumer credit
cards usually do not exceed $35 thousand. Unsecured consumer loans usually have a term of no longer than 36 months.

Deposits

Deposits are our primary source of funds to support our revenue-generating assets. We offer traditional deposit products to
businesses and other customers with a variety of rates and terms. Deposits at our bank are insured by the FDIC up to statutory
limits. We price our deposit products with a view to maximizing our share of each customer’s financial services business and
prudently managing our cost of funds. At December 31, 2021, we held $8.0 billion of total deposits, which consisted of $2.7
billion, or 33%, in non-interest bearing checking accounts, $4.9 billion, or 62%, in interest-bearing checking accounts, money
market and savings accounts, and $0.4 billion, or 5%, in CDs and IRAs.

6

Competition

The banking and financial services industry is extremely competitive in our market area. We face vigorous competition for
customers, loans and deposits from many companies, including commercial banks, savings and loan associations, finance
companies, credit unions, trust companies, mortgage companies, money market mutual funds, insurance companies, and
brokerage and investment firms. Many of these competitors are significantly larger than us, have greater resources, higher
lending limits and larger branch systems and offer a wider array of financial services than us. In addition, some of these
competitors, such as credit unions, are subject to a lesser degree of regulation or taxation than banks.

Human Capital Resources

Workforce Composition and Demographics

At December 31, 2021, First Commonwealth and its subsidiaries employed 1,393 full-time employees and 78 part-time
employees with 609 exempt and 862 non-exempt employees. The average age of the workforce is 43.1 years and the average
tenure is 7.7 years. Our workforce is 67% female.

Diversity & Inclusion

In 2021, we strengthened and accelerated our focus on and action towards Diversity & Inclusion ("D&I") in several key ways.
We appointed Vicki L. Fox as Senior Vice President and Diversity & Inclusion Officer with overall responsibility for
identifying and mentoring diverse talent, keeping management apprised of emerging D&I issues, and evolving our D&I
practices. Ms. Fox has an extensive background in human resources and banking at First Commonwealth, and a deep
connection with our company and communities, especially our Pittsburgh market.

Ms. Fox serves as the co-chair of our Diversity & Inclusion Committee, along with T. Michael Price, CEO. The Committee is
comprised of executive and senior leadership and diverse employees and is actively involved in developing and overseeing
initiatives to support our D&I initiatives.

The following is a summary of D&I initiatives in 2021:

• We distributed regional and line of business diversity scorecards in each of our five regions and to our executive

officers for their unit to increase accountability for diversity in our workforce.

• We provided D&I training to our Board of Directors and senior leaders.

• We created an African American employee resource group to receive and respond to feedback on ways in which First

Commonwealth can better attract and retain African American employees. Their work resulted in creating an
ambassador program for new African American hires that will lead into mentorship relationships with leaders in the
company and a welcome video to connect African American new hires to African American leaders.

•

Our strong partnership with BankWork$ continued in our Pittsburgh market. Through a structured training program,
BankWork$ prepares people from underserved communities for entry-level, branch roles in banking. First
Commonwealth actively participates by engaging in classroom discussions with students, attending job fairs and hiring
graduates.

Our focus on D&I has produced meaningful progress in several scorecard categories. As of December 31, 2021, racial
minorities comprised 6.7% of the workforce. Racial minorities and women comprised 5.2% and 48.2%, respectively of those in
leadership positions (defined by corporate title, Assistant Vice President and higher). Women, including one racial minority,
hold three seats on our Board of Directors.

Several of our employees were recognized for their work advancing D&I, including Ms. Fox and Jane Grebenc, our Chief
Revenue Officer and Bank President, who were both recognized by the Pennsylvania Banker’s Association for their work in
championing women in the banking industry. Other employees received external recognitions, including awards for ‘Foremost
Under Forty’, Black Excellence in Real Estate, Patriotic Employer Award, NAACP Community Service Award-Indiana
County, PA and Young Professionals Forty Under Forty.

Talent Attraction and Retention

Our employees are key to the success of delivering our mission as an organization and achieving our financial targets. We are
committed to attracting, retaining and promoting top quality talent regardless of race, color, religion, gender, sexual orientation,
national origin, age, disability, marital status, military status, genetic information or any other category protected by federal,
state and local laws. We strive to identify and select the best candidates for all open positions based on qualifying factors for
each job. We are dedicated to providing a workplace environment and culture for our employees that is inclusive, supportive,

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and free of any form of discrimination or harassment; rewarding and recognizing our employees based on their individual
results and performance; and recognizing and respecting all of the characteristics and differences that make each of our
employees unique.

Talent Development

Guided by executive leadership, our Strategic and Inspired Leadership ("SAIL") program strengthens our senior leadership.
Over 130 of our leaders are involved in quarterly forums and regional “musters” (or meetings) that focus on relevant topics,
such as our strategic and operating plans, D&I, employee engagement and learning & growth opportunities. The sessions are
informative and collaborative and valued by the participants.

Since 2009, we’ve supported a mentorship program, open to all employees. The program provides 1:1 mentorship pairings,
group development sessions and volunteer opportunities. In 2021, there were a total of 116 participants, including 75 women
and 13 racial minorities.

Within our retail unit, we provide a career development program for entry level employees to help them achieve positions of
increased opportunity. Leaders are given industry-specific training as well as development opportunities to understand their
strengths and improve coaching and execution skills. We also provided inclusive leadership courses, including helping
employees communicate as an ally. Lastly, we invested in an established, industry-specific and developmental training course
library from which all employees benefit.

Our talent acquisition priority is to invest in the development of internal talent and to provide career advancement opportunities
to our employees. In 2021, we promoted 324 employees, of whom 70% were female and 7% were self-identified minorities.

In 2021, we leveraged the lessons learned as a result of remote work through the pandemic to effectively structure and deliver a
permanent telecommuting policy and program for approximately 27% of our workforce. We believe that flexible work location
opportunities will allow us to broaden our candidate pool and retain employees whose jobs can be performed remotely.

We listen to our employees through market visits, executive forums and our annual employee engagement survey. In 2021,
67% of our employees completed the annual survey. Our overall ratings exceeded the medians of the financial services
industry and all companies that utilize our survey provider. The survey reflected that employees have fulfillment in working for
a community bank and making a difference and are satisfied with their jobs and First Commonwealth as a whole.

Our employment turnover for 2021 was calculated at 31.2%, which is generally aligned with industry benchmarks.

Compensation and Benefits

We strive to provide a competitive and fair total compensation package to our employees. We price positions against recent
industry benchmark reports and salary surveys to establish salary ranges. In 2021, we made significant steps to attract and
retain employees in our retail and operations units by increasing the base pay in several positions to align with career
advancement opportunities and to address market competition and wage compression.

Employee benefits plans support employees with insurance, retirement and work/life plans. Our health plan is structured with a
tiered premium approach in which 39% of plan participants are in the lowest tier and pay a lower monthly premium than the
other two higher paying tiers. Our 401k plan offers an employer match on employee contributions of up to 4% of eligible
earnings. We offer a variety of other benefits, including disability plans, a generous paid-time off policy and an employee
assistance program.

Health and Safety

As the global pandemic continued into 2021, we continued to prioritize the safety and well-being of our employees, customers,
partners and communities through healthy workplace practices and consistent communication reminders and updates.

We continuously supported cleaning protocols, provided personal protective equipment to our employees, required face
coverings for employees and customers, conducted temperature screening and took other measures to comply with directives of
state and local health departments. We safely welcomed back employees to the workplace in fall 2021, with flexibility to
continue working remotely as needed. We also developed a permanent telecommuting policy. As of December 31, 2021, we
had 1,023 employees on location (70%), 399 telecommuting employees (27%) and 49 employees temporarily working from
home (3%).

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We also support our employees by offering employee assistance programs that connect them with resources to help them in
certain life situations, such as personal counselling, legal services and adoption. Our employees support each other through
Hearts2Hands, an employee-funded program that provides financial assistance to employees who experience hardships.

Culture and Engagement

Our culture is rooted in our core values of accountability, customer focus, integrity, excellence and inclusion, and in our
mission to improve the financial lives of our neighbors and their businesses. We practice a Customer Service Promise of five
critical behaviors that we encourage every one of our employees to demonstrate at every customer interaction – internal or
external – with the intent of creating an extraordinary customer experience, which is measured by our customer satisfaction
scores. The five behaviors are to put customers first, be relentless, inspire confidence, champion simplicity and obsess with yes.

We are proud that we were selected as a Forbes World’s Best Bank in 2021 for the third consecutive year and earned the #1
SBA lender ranking by serving businesses in our Pittsburgh market. Based on employee feedback, First Commonwealth was
named a Top Workplace in the Pittsburgh area in 2021 for the third consecutive year.

In 2021, First Commonwealth supported our communities with more than $2,000,000 in community giving and $46,000,000 in
community development investment support. Our employees provided 13,600 volunteer hours and 625 hours of financial
education classes. To recognize employees who go above and beyond in their volunteerism and community engagement, we
present a quarterly “Golden Tower” award which includes $1,000 for the recipient to give to a charitable organization of their
choice. We provide corporate support for the United Way, including a corporate match, and, in 2021, we gave more than
$162,000 in total, with our match to support our employees’ contributions. In addition, our 2021 ‘Share the Warmth’
community campaign supported more than 20 local community action agencies across our footprint. In 2021, the company
matched more than $30,000 in donations.

Supervision and Regulation

The following discussion sets forth the material elements of the regulatory framework applicable to financial holding
companies, such as First Commonwealth, and their subsidiaries. The regulatory framework is intended primarily for the
protection of depositors, other customers and the federal deposit insurance fund and not for the protection of security holders.
The rules governing the regulation of financial institutions and their holding companies are very detailed and technical.
Accordingly, the following discussion is general in nature and is not intended to be complete or to describe all the laws and
regulations that apply to First Commonwealth and its subsidiaries. A change in applicable statutes, regulations or regulatory
policy may have a material adverse effect on our business, financial condition or results of operations.

Bank Holding Company Regulation

First Commonwealth is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended
(“BHC Act”), and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (“FRB”).

Acquisitions. Under the BHC Act, First Commonwealth is required to obtain the prior approval of the FRB before it can merge
or consolidate with any other bank holding company or acquire all or substantially all of the assets of any bank that is not
already majority owned by it, or acquire direct or indirect ownership, or control of, any voting shares of any bank that is not
already majority owned by it, if after such acquisition it would directly or indirectly own or control more than 5% of the voting
shares of such bank. In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory
authorities will consider, among other things, the competitive effect and public benefits of the transactions, the financial,
including capital, position of the combined organization, the risks to the stability of the U.S. banking or financial system, the
applicant's performance record under the Community Reinvestment Act ("CRA") and its compliance with fair housing and
other consumer protection laws and the effectiveness of the subject organizations in combating money laundering activities.

Banking Holding Company Activities. In general, the BHC Act limits the business of bank holding companies to banking,
managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a
proper incident thereto. In addition, bank holding companies that qualify and elect to be financial holding companies such as
First Commonwealth may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is
either (i) financial in nature or incidental to such financial activity or (ii) complementary to a financial activity and does not
pose a substantial risk to the safety and soundness of depository institutions or the financial system generally, without in either
case the prior approval of the FRB. Activities that are financial in nature include securities underwriting and dealing, insurance
agency activities and making merchant banking investments.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries
must be well capitalized and well managed. A depository institution subsidiary is considered to be well capitalized if it satisfies
the requirements for this status discussed in the section below captioned "Prompt Corrective Action." A depository institution

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subsidiary is considered well managed if it received a composite rating and management rating of at least satisfactory in its
most recent examination. A financial holding company’s status will also depend upon maintaining its status as well capitalized
and well managed under applicable FRB regulations. If a financial holding company ceases to meet these capital and
management requirements, the FRB’s regulations provide that the financial holding company must enter into an agreement with
the FRB to comply with all applicable capital and management requirements. Until the financial holding company returns to
compliance, the FRB may impose limitations or conditions on the conduct of its activities, and the company may not commence
any of the broader financial activities permissible for financial holding companies or acquire a company engaged in such
financial activities without prior approval of the FRB. If the company does not return to compliance within 180 days, the FRB
may require divestiture of the holding company’s depository institutions.

In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company
engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding
company must have received a rating of at least satisfactory in its most recent examination under the CRA.

The FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its
ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or
such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the
bank holding company.

Reporting. Under the BHC Act, First Commonwealth is subject to examination by the FRB and is required to file periodic
reports and other information of its operations with the FRB.

Source of Strength Doctrine. FRB policy and federal law require bank holding companies to act as a source of financial and
managerial strength to their subsidiary banks. First Commonwealth is expected to commit resources to support FCB, including
at times when First Commonwealth may not be in a financial position to provide such resources. Any capital loans by a bank
holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness
of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to priority of payment.

Affiliate Transactions. Transactions between FCB, on the one hand, and First Commonwealth Financial Corporation and its
other subsidiaries, on the other hand, are regulated under federal banking laws. The Federal Reserve Act imposes quantitative
and qualitative requirements and collateral requirements on covered transactions by FCB with, or for the benefit of, its
affiliates, and generally requires those transactions to be on terms at least as favorable to FCB as if the transaction were
conducted with an unaffiliated third party. Covered transactions are defined by statute to include a loan or extension of credit,
as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the
affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the
affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. In
general, any such transaction by FCB (or its subsidiaries) must be limited to certain thresholds on an individual and aggregate
basis and, for credit transactions with any affiliate, must be secured by designated amounts of specified collateral.

SEC Regulations. First Commonwealth is also under the jurisdiction of the Securities and Exchange Commission (“SEC”) and
various state securities commissions for matters relating to the offer and sale of its securities and is subject to the SEC rules and
regulations relating to periodic reporting, proxy solicitation and insider trading.

Bank Regulation

FCB is a state bank chartered under the Pennsylvania Banking Code and is not a member of the FRB. As such, FCB is subject
to the supervision of, and is regularly examined by, both the Federal Deposit Insurance Corporation (“FDIC”) and the
Pennsylvania Department of Banking and Securities and is required to furnish quarterly reports to both agencies. The approval
of the Pennsylvania Department of Banking and Securities and FDIC is also required for FCB to establish additional branch
offices or merge with or acquire another banking institution.

Dividends. First Commonwealth is a legal entity separate and distinct from its banking and other subsidiaries. As a bank
holding company, First Commonwealth is subject to certain restrictions on its ability to pay dividends under applicable banking
laws and regulations. Federal bank regulators are authorized to determine under certain circumstances relating to the financial
condition of a bank holding company or a bank that the payment of dividends would be an unsafe or unsound practice and to
prohibit payment thereof. In particular, federal bank regulators have stated that paying dividends that deplete a banking
organization’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking
organizations should generally pay dividends only out of current operating earnings.

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A significant portion of our income comes from dividends from our bank, which is also the primary source of our liquidity. In
addition to the restrictions discussed above, our bank is subject to limitations under Pennsylvania law regarding the level of
dividends that it may pay to us. In general, dividends may be declared and paid only out of accumulated net earnings and may
not be declared or paid unless surplus is at least equal to capital. Dividends may not reduce surplus without the prior consent of
the Pennsylvania Department of Banking and Securities. FCB has not reduced its surplus through the payment of dividends. As
of December 31, 2021, FCB could pay dividends to First Commonwealth of $311.1 million without reducing its capital levels
below "well capitalized" levels and without the approval of the Pennsylvania Department of Banking and Securities.

Community Reinvestment. Under the Community Reinvestment Act ("CRA") a bank has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and
moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best
suited to its particular community, consistent with the CRA. The CRA requires the applicable regulatory agency to assess an
institution’s record of meeting the credit needs of its community. The CRA requires public disclosure of an institution’s CRA
rating and requires that the applicable regulatory agency provide a written evaluation of an institution’s CRA performance
utilizing a four-tiered descriptive rating system. An institution’s CRA rating is considered in determining whether to grant
charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Performance less than
satisfactory may be the basis for denying an application. For its most recent examination, FCB received a “satisfactory” rating.

Consumer Financial Protection. We are subject to a number of federal and state consumer protection laws that extensively
govern our relationship with our customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting
Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability
Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt
Collection Practices Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as
state usury laws and laws regarding unfair and deceptive acts and practices. These and other federal laws, among other things,
require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit
discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit
unfair, deceptive and abusive practices, restrict our ability to raise interest rates and subject us to substantial regulatory
oversight. Violations of applicable consumer protection laws can result in significant potential liability from litigation brought
by customers, including actual damages, restitution and attorneys’ fees. Federal bank regulators, state attorneys general and
state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and
other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each
jurisdiction in which we operate and civil money penalties. Failure to comply with consumer protection requirements may also
result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to
pursue or our prohibition from engaging in such transactions even if approval is not required.

The Consumer Financial Protection Bureau ("CFPB"), has broad rulemaking, supervisory and enforcement powers under
various federal consumer financial protection laws. Although all institutions are subject to rules adopted by the CFPB and
examination by the CFPB in conjunction with examinations by the institution’s primary federal regulator, the CFPB has
primary examination and enforcement authority over institutions with assets of $10 billion or more. The FDIC has primary
responsibility for examination of our bank and enforcement with respect to federal consumer protection laws so long as our
bank has total consolidated assets of less than $10 billion, and state authorities are responsible for monitoring our compliance
with all state consumer laws. The CFPB also has the authority to require reports from institutions with less than $10 billion in
assets, such as our bank, to support the CFPB in implementing federal consumer protection laws, supporting examination
activities, and assessing and detecting risks to consumers and financial markets.

Deposit Insurance. Deposits of FCB are insured up to applicable limits by the FDIC and are subject to deposit insurance
assessments to maintain the Deposit Insurance Fund (“DIF”). Deposit insurance assessments are based upon average total assets
minus average total equity. The insurance assessments are based upon a matrix that takes into account a bank’s capital level and
supervisory rating. The FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and
unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation,
rule, order or condition imposed by the FDIC. As an institution with less than $10 billion in assets, FCB’s assessment rates are
based on its risk classification (i.e., the level of risk it poses to the FDIC’s deposit insurance fund). For institutions with $10
billion or more in assets, assessment rates are calculated using a scorecard that combines the supervisory risk ratings of the
institution with certain forward-looking financial measures. These assessment rates are subject to adjustments based upon the
insured depository institution’s ratio of long-term unsecured debt to the assessment base, long-term unsecured debt issued by
other insured depository institutions to the assessment base, and brokered deposits to the assessment base. However, the
adjustments based on brokered deposits to the assessment base will not apply so long as the institution is well capitalized and
has a composite CAMELS rating of 1 or 2. The CAMELS rating system is a bank rating system where bank supervisory
authorities rate institutions according to six factors: capital adequacy, asset quality, management quality, earnings, liquidity and
sensitivity to market risk. The FDIC may make additional discretionary assessment rate adjustments.

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Capital Requirements

First Commonwealth and FCB are each required to comply with applicable capital adequacy standards established by the FRB.

In July 2013, the federal bank regulators approved final rules (the “Basel III Capital Rules”) implementing the Basel III
framework as well as certain provisions of the Dodd-Frank Act. Since fully phased in on January 1, 2019, the Basel III Capital
Rules require First Commonwealth and FCB to maintain the following:

•

•

•

•

A minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of at least 4.5%, plus a 2.5% “capital
conservation buffer” (resulting in a minimum ratio of CET1 to risk-weighted assets of 7.0%);

A minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer
(resulting in a minimum Tier 1 capital ratio of 8.5%);

A minimum ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the
capital conservation buffer (resulting in a minimum total capital ratio of 10.5%); and

A minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average consolidated assets as reported
on consolidated financial statements (known as the “leverage ratio”).

Banking institutions that fail to meet the effective minimum ratios once the capital conservation buffer is taken into account, as
detailed above, will be subject to constraints on capital distributions, including dividends and share repurchases, and certain
discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the
institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not reflected
in net income).

The Basel III Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the
requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized
through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1
to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.
During 2015, First Commonwealth and FCB made a one-time permanent election, as permitted under Basel III Capital Rules, to
exclude the effects of accumulated other comprehensive income items for the purposes of determining regulatory capital ratios.

With respect to FCB, the Basel III Capital Rules also revise the “prompt corrective action” regulations pursuant to Section 38 of
the Federal Deposit Insurance Act, as discussed below under “Prompt Corrective Action.” The Basel III Capital Rules prescribe
a standardized approach for risk weightings that expand the risk-weighting categories from the general risk-based capital rules
to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from
0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a
variety of asset categories.

Liquidity Requirements

The Basel III liquidity framework requires banks and bank holding companies to measure their liquidity against specific
liquidity tests. One test, referred to as the liquidity coverage ratio (“LCR”), is designed to ensure that the banking entity
maintains an adequate level of unencumbered high-quality liquid assets equal to the entity’s expected net cash outflow for a 30-
day time horizon (or, if greater, 25% of its expected total cash outflow) under an acute liquidity stress scenario. The other test,
referred to as the net stable funding ratio (“NSFR”), is designed to promote more medium- and long-term funding of the assets
and activities of banking entities over a one-year time horizon. Rules applicable to certain large banking organizations have
been implemented for LCR and proposed for NSFR; however, based on our asset size, these rules do not currently apply to First
Commonwealth and FCB.

Prompt Corrective Action

The Federal Deposit Insurance Act, as amended (“FDIA”), requires, among other things, the federal banking agencies to take
“prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. The FDIA
includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital
levels compare with various relevant capital measures and certain other factors, as established by regulation. The relevant
capital measures are the total capital ratio, the CET1 capital ratio (a new ratio requirement under the Basel III Capital Rules),
the Tier 1 capital ratio and the leverage ratio.

A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital
ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not
subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any
capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1

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capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is
not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1
capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv)
“significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less
than 3%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically
undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An
institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is
determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain
matters. A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the
capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other
purposes.

The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend)
or paying any management fee to its parent holding company if the depository institution would thereafter be
“undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital
restoration plan. The agencies may not accept such a plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration
plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with
such capital restoration plan and must also provide appropriate assurances of performance. The aggregate liability of the parent
holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it
became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If
a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”

In addition, the FDIA prohibits an insured depository institution from accepting brokered deposits or offering interest rates on
any deposits significantly higher than the prevailing rate in the bank's normal market area or nationally (depending upon where
the deposits are solicited), unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC. A
depository institution that is adequately capitalized and accepts brokered deposits under a waiver from the FDIC may not pay
an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.

“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of
receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a
receiver or conservator.

The appropriate federal banking agency may, under certain circumstances, reclassify a well-capitalized insured depository
institution as adequately capitalized. The FDIA provides that an institution may be reclassified if the appropriate federal
banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe or unsound condition or
deems the institution to be engaging in an unsafe or unsound practice.

The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the
supervisory provisions as if the institution were in the next lower category (but not treat a significantly undercapitalized
institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution.

First Commonwealth believes that, as of December 31, 2021, FCB was a “well-capitalized” bank as defined by the FDIA. See
Note 23 “Regulatory Restrictions and Capital Adequacy” of Notes to the Consolidated Financial Statements, contained in Item
8, for a table that provides a comparison of First Commonwealth’s and FCB’s risk-based capital ratios and the leverage ratio to
minimum regulatory requirements.

The Volcker Rule

The Dodd-Frank Act prohibits banks and their affiliates from engaging in proprietary trading and investing in and sponsoring
hedge funds and private equity funds (so called "covered funds"). The statutory provision is commonly called the “Volcker
Rule.” Banks with less than $10 billion in total consolidated assets, such as FCB, are exempt from the Volker Rule.

Depositor Preference

Under federal law, depositors (including the FDIC with respect to the subrogated claims of insured depositors) and certain
claims for administrative expenses of the FDIC as receiver would be afforded a priority over other general unsecured claims
against such an institution in the liquidation or other resolution of such an institution by any receiver.

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Interchange Fees

Under the Durbin Amendment to the Dodd-Frank Act, the FRB adopted rules establishing standards for assessing whether the
interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to
the costs incurred by issuers for processing such transactions. Interchange fees, or “swipe” fees, are charges that merchants pay
to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum
permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit
interchange transactions. The FRB also adopted a rule to allow a debit card issuer to recover 1 cent per transaction for fraud
prevention purposes if the issuer complies with certain fraud-related requirements required by the FRB. The FRB also has rules
governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or
prepaid product.

The Dodd-Frank Act contained an exemption from the interchange fee cap for any debit card issuer that, together with its
affiliates, has total assets of less than $10 billion as of the end of the previous calendar year. We currently qualify for this
exemption. We earned approximately $28.0 million in card related interchange income during the 2021 fiscal year. If we did
not qualify for this exemption, we estimate that our interchange income would decrease by $13.8 million. We would become
subject to the interchange fee cap beginning July 1 of the year after the level of our total assets reaches or exceeds $10 billion.

Financial Privacy

The federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public
information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers
and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to
outside vendors.

Anti-Money Laundering and the USA Patriot Act

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering
and terrorist financing. The USA PATRIOT Act of 2001 (the “USA Patriot Act”) substantially broadened the scope of United
States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations,
creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. Financial institutions are
also prohibited from entering into specified financial transactions and account relationships and must use enhanced due
diligence procedures in their dealings with certain types of high-risk customers and implement a written customer identification
program. Financial institutions must take certain steps to assist government agencies in detecting and preventing money
laundering and report certain types of suspicious transactions. Regulatory authorities routinely examine financial institutions
for compliance with these obligations, and failure of a financial institution to maintain and implement adequate programs to
combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious
legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve
merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not
required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be
violating these obligations.

Office of Foreign Assets Control Regulation

The U.S. Treasury Department’s Office of Foreign Assets Control ("OFAC") administers and enforces economic and trade
sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign
countries, nationals and others. OFAC publishes lists of specially designated targets and countries. First Commonwealth is
responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting
unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to
comply with these sanctions could have serious legal and reputational consequences, including causing applicable bank
regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such
transactions even if approval is not required.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial
institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk
management processes also address the risk posed by compromised customer credentials, including security measures to
reliably authenticate customers accessing internet-based services of the financial institution. The other statement indicates that a
financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid
recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A
financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and

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address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type
of cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including
financial penalties.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs
and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have
also recently implemented or modified their data breach notification and data privacy requirements. We expect this trend of
state-level activity in those areas to continue, and are continually monitoring developments in the states in which our customers
are located.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations
and to store sensitive data. We employ an in-depth, layered, defensive approach that leverages people, processes and technology
to manage and maintain cybersecurity controls. We employ a variety of preventative and detective tools to monitor, block, and
provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding
the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in
volume, and attackers respond rapidly to changes in defensive measures. While to date we have not experienced a significant
compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our
customers and third-party service providers are under constant threat and it is possible that we could experience a significant
event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future
due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of internet banking,
mobile banking and other technology-based products and services by us and our customers. See Item 1A. Risk Factors for a
further discussion of risks related to cybersecurity.

Future Legislation and Regulation

Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state
legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in
those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the
manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the
application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure
under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes,
require us to increase our regulatory capital and modify our business strategy, and limit our ability to pursue business
opportunities in an efficient manner. Our business, financial condition, results of operations or prospects may be adversely
affected, perhaps materially, as a result.

Availability of Financial Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy
any document we file at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. Our SEC filings are also available to the public on the SEC website at www.sec.gov and on our website at
www.fcbanking.com.

We also make available on our website, www.fcbanking.com, and in print to any shareholder who requests them, our Corporate
Governance Guidelines, the charters for our Audit, Risk, Compensation and Human Resources, and Governance Committees,
and the Code of Conduct and Ethics that applies to all of our directors, officers and employees.

Our Chief Executive Officer has certified to the New York Stock Exchange (“NYSE”) that, as of the date of the certification, he
was not aware of any violation by First Commonwealth of NYSE’s corporate governance listing standards. In addition, our
Chief Executive Officer and Chief Financial Officer have made certain certifications concerning the information contained in
this report pursuant to Section 302 of the Sarbanes-Oxley Act. The Section 302 certifications appear as Exhibits 31.1 and 31.2
to this annual report on Form 10-K.

ITEM 1A.

Risk Factors

An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that
management believes affect us are described below. Before making an investment decision, you should carefully consider the
risks and uncertainties described below together with all of the other information included or incorporated by reference in this
report. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that
management is not aware of or focused on or that management currently deems immaterial may also impair our business
operations. This report is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business,

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financial condition and results of operations could be materially and adversely affected. If this were to happen, the market price
of our common stock could decline significantly, and you could lose all or part of your investment.

Risks Related To Our Business

Interest Rate Risks

We Are Subject to Interest Rate Risk

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between
interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing
liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control,
including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the
Federal Open Market Committee. Changes in monetary policy, including changes in interest rates, could influence not only the
interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes
could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, and
(iii) the average duration of our mortgage-backed securities portfolio. If the interest rates paid on deposits and other borrowings
increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore
earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other
investments fall more quickly than the interest rates paid on deposits and other borrowings. Some foreign central banks have
moved to a negative interest rate environment, which has exerted downward pressure on the profitability of banks in those
regions and this interest rate trend could extend to the United States. Any substantial, unexpected, or prolonged change in
market interest rates could have a material adverse effect on our business, financial condition and results of operations. See Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned “Net
Interest Income” and Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for further
discussion related to interest rate sensitivity and our management of interest rate risk.

We May Be Adversely Impacted by the Transition from LIBOR as a Reference Rate

In 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced that after 2021 it would no longer compel
banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). In November 2020, the
administrator of LIBOR announced it would consult on its intention to extend the retirement date of certain offered rates,
whereby the publication of the one-week and two-month U.S. Dollar LIBOR settings would cease after December 31, 2021, but
the publication of the remaining U.S. Dollar LIBOR settings would continue until June 30, 2023. Given consumer protection,
litigation, and reputation risks, in November 2020, following the administrator’s consultation announcement, the bank
regulatory agencies indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021
would create safety and soundness risks and that they would examine bank practices accordingly. Therefore, the agencies
encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any
event by December 31, 2021. On March 5, 2021, the FCA and the administrator of LIBOR confirmed that immediately after
December 31, 2021, publication of the one-week and two-month U.S. Dollar LIBOR settings would cease and immediately
after June 30, 2023, any remaining U.S. dollar LIBOR settings would either cease to be published or no longer be
representative.

Several alternative rates have emerged as potential alternatives to or replacements of LIBOR, with varying levels of market
acceptance, and with varying levels of appropriateness depending on the particular institution, counterparty, or financial
instrument in question. In particular, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates
Committee of the New York Fed (“ARRC”)) have, among other things, published recommended fallback language for LIBOR-
linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., Secured Overnight Financial
Rate ("SOFR"), American Interbank Offered Rate ("AMERIBOR"), Bloomberg Short Term Bank Yield ("BSBY")), and
proposed implementations of the recommended alternatives in floating rate instruments. Market acceptance of these various
potential fallback and alternative rates continues to evolve. While the ARRC has recommended SOFR as its preferred fallback
rate for LIBOR-linked instruments, the bank regulatory agencies have repeatedly indicated that they do not intend to
recommend a specific fallback rate for use in place of LIBOR, and that financial institutions should “use any reference rate for
its loans that the bank determined to be appropriate for its funding model and customer needs.”

While we ceased originating new contracts for LIBOR-linked financial instruments prior to December 31, 2021, we have a
significant number of existing loans, derivative contracts, borrowings and other financial instruments with attributes that are
either directly or indirectly dependent on LIBOR, and which will need to be transitioned prior to June 30, 2023. The transition
from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk.
Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from
those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models,
valuation tools, product design and hedging strategies. Furthermore, failure to adequately manage this transition process with
our customers could adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of
the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our
business, financial condition and results of operations.

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Credit and Lending Risks

We Are Subject to Lending Risk

There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in
interest rates and changes in the economic conditions in the markets where we operate as well as those across the United States.
Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay
outstanding loans or the value of the collateral securing these loans.

We Are Subject to Risk Arising from Conditions in the Commercial Real Estate Market

As of December 31, 2021, commercial real estate mortgage loans comprised approximately 33% of our loan portfolio.
Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage
loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because
payments on loans secured by commercial real estate often depend upon the successful operation and management of the
properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the
borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations.
In recent years, commercial real estate markets have been experiencing substantial growth, and increased competitive pressures
have contributed significantly to historically low capitalization rates and rising property values. Furthermore, certain segments
of the commercial real estate markets, such as office, hospitality and retail, have been particularly impacted by the economic
disruption resulting from the COVID-19 pandemic. Accordingly, the federal banking regulatory agencies have expressed
concerns about weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures
and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of
delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our
business, financial condition and results of operations.

Our Allowance for Credit Losses may be Insufficient

All borrowers carry the potential to default and our remedies to recover may not fully satisfy money previously loaned. We
maintain an allowance for credit losses, which represents management’s best estimate of credit losses within the existing
portfolio of loans. The allowance, in the judgment of management, is appropriate to reserve for estimated loan losses and risks
inherent in the loan portfolio. The level of the allowance for credit losses reflects management’s continuing evaluation of
industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions
and unidentified losses in the current loan portfolio. The determination of the appropriate level of the allowance for credit losses
inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using
existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions
or forecasts, new information regarding existing loans, identification of additional problem loans and other factors, both within
and outside of our control, may require an increase in the allowance for credit losses. In addition, bank regulatory agencies
periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the
recognition of additional loan charge-offs, based on judgments different than those of management. An increase in the
allowance for credit losses results in a decrease in net income or losses, and possibly risk-based capital, and may have a
material adverse effect on our financial condition and results of operations.

Liquidity Risk

We Are Subject to Liquidity Risk

We require liquidity to meet our deposit and debt obligations as they come due. Our access to funding sources in amounts
adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or
the financial services industry or economy generally. Factors that could reduce our access to liquidity sources include a
downturn in the economy, difficult credit markets or adverse regulatory actions against us. Our access to deposits may also be
affected by the liquidity needs of our depositors. In particular, a substantial majority of our liabilities are demand, savings,
interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison,
a substantial portion of our assets are loans, which cannot be called or sold in the same time frame. We may not be able to
replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to
withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could have a material adverse effect
on our business, financial condition and results of operations.

Operational Risks

Labor shortages and constraints in the supply chain could adversely affect our customers’ operations as well as our operations.

Many sectors in the United States and around the world are experiencing a shortage of workers. The shortage of workers is
exacerbating supply chain disruptions around the world, causing certain industries to struggle to regain momentum due to a lack
of workers or materials. Our commercial customers may be impacted by the shortage of workers and constraints in the supply
chain, which could adversely impact our customers’ operations. Customers may experience disruptions in their operations,
which could lead to reduced cash flow and difficulty in making loan repayments. The financial services industry has also been

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affected by the shortage of workers, and First Commonwealth has experienced the intense competition for talent that is
currently underway in the financial services industry. This may lead to open positions remaining unfilled for longer periods of
time or a need to increase wages to attract workers. We have had to recently increase wages in certain positions to attract talent,
particularly in entry-level type positions and certain specialty areas.

Our Accounting Estimates and Risk Management Processes Rely On Analytical and Forecasting Models

The processes we use to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the
processes used to estimate the effects of changing interest rates and other market measures on our financial condition and
results of operations, depends upon the use of analytical and forecasting models. These models reflect assumptions that may not
be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate,
the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the
models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses
upon changes in market interest rates or other market measures. If the models we use for estimating our expected credit losses
are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs. If the models we use to
measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate
unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any
such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and
results of operations.

The Value of Our Goodwill and Other Intangible Assets May Decline in the Future

As of December 31, 2021, we had $314.5 million of goodwill and other intangible assets. A significant decline in our expected
future cash flows, a significant adverse change in the business climate, slower growth rates or a significant and sustained
decline in the price of the Company’s common stock may necessitate taking charges in the future related to the impairment of
our goodwill and other intangible assets which could have a material adverse effect on our business, financial condition and
results of operations.

We Are Subject to Risk Arising from Failure or Circumvention of Our Controls and Procedures

Our internal controls, disclosure controls and procedures, and corporate governance policies and procedures are based in part on
certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any
failure or circumvention of our controls and procedures; failure to comply with regulations related to controls and procedures;
or failure to comply with our corporate governance policies and procedures could have a material adverse effect on our
reputation, business, financial condition and results of operations. Furthermore, notwithstanding the proliferation of technology
and technology-based risk and control systems, our businesses ultimately rely on people as our greatest resource, and, from
time-to-time, they make mistakes or engage in violations of applicable policies, laws, rules or procedures that are not always
caught immediately by our technological processes or by our controls and other procedures, which are intended to prevent and
detect such errors or violations. Human errors, malfeasance and other misconduct, including the intentional misuse of client
information in connection with insider trading or for other purposes, even if promptly discovered and remediated, can result in
reputational damage or legal risk and have a material adverse effect on our business, financial condition and results of
operations.

New Lines of Business, Products or Services and Technological Advancements May Subject Us to Additional Risks

From time to time, we implement new lines of business or offer new products and services within existing lines of business.
There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not
fully developed. In developing and marketing new lines of business and/or new products and services we invest significant time
and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services
may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with
regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new
line of business or a new product or service.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new
technology-driven products and services. Our future success depends, in part, upon our ability to address the needs of our
customers by using technology to provide products and services that will satisfy customer demands, as well as to create
additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological
improvements. We may not be able to effectively implement new technology driven products and services or be successful in
marketing these products and services to our customers. In addition, our implementation of certain new technologies, such as
those related to artificial intelligence and algorithms, in our business processes may have unintended consequences due to their
limitations or our failure to use them effectively. In addition, cloud technologies are also critical to the operation of our systems,
and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the
financial services industry could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the
effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and

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implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect
on our business, financial condition and results of operations.

Our Reputation and our Business Are Subject to Negative Publicity Risk

Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public
opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory
consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including
lending practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate
protection of customer information, and from actions taken by government regulators and community organizations in response
to that conduct. Negative public opinion could also result from adverse news or publicity that impairs the reputation of the
financial services industry generally. In addition, our reputation or prospects may be significantly damaged by adverse publicity
or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or
other parts of the internet, and this risk is magnified by the speed and pervasiveness with which information is disseminated
through those channels.

Our Business, Financial Condition and Results of Operations Are Subject to Risk from Changes in Customer Behavior

Individual, economic, political, industry-specific conditions and other factors outside of our control, such as fuel prices, energy
costs, real estate values or other factors that affect customer income levels, could alter anticipated customer behavior, including
borrowing, repayment, investment and deposit practices. Such a change in these practices could materially adversely affect our
ability to anticipate business needs and meet regulatory requirements. Further, difficult economic conditions may negatively
affect consumer confidence levels. A decrease in consumer confidence levels would likely aggravate the adverse effects of
these difficult market conditions on us, our customers and others in the financial institutions industry.

First Commonwealth Relies on Dividends from its Subsidiary Bank for Most of Its Revenue

First Commonwealth is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenues from
dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on First Commonwealth’s
common stock and interest and principal on First Commonwealth’s debt. Various federal and/or state laws and regulations limit
the amount of dividends that FCB and certain non-bank subsidiaries may pay to First Commonwealth. In the event FCB is
unable to pay dividends to First Commonwealth, First Commonwealth may not be able to service debt, pay obligations or pay
dividends on its common stock. The inability to receive dividends from FCB could have a material adverse effect on First
Commonwealth’s business, financial condition and results of operations.

Acts of Cyber-Crime May Compromise Client and Company Information, Disrupt Access to Our Systems or Result in Loss of
Client or Company Assets.

Our business is dependent upon the availability of technology, the Internet and telecommunication systems to enable financial
transactions by clients, record and monitor transactions and transmit and receive data to and from clients and third parties.
Information security risks have increased significantly due to the use of online, telephone and mobile banking channels by
clients and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our
technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of,
cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the
unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other
information, the theft of client assets through fraudulent transactions or disruption of our or our clients’ or other third parties’
business operations.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable to attempted security
breaches or disruptions because the techniques used in such attempts are constantly evolving and generally are not recognized
until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly,
we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and
thus it is virtually impossible for us to entirely mitigate this risk. While we maintain specific “cyber” insurance coverage, which
would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case.
Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not
be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or
those related to our customers, merchants or our third party vendors, including as a result of cyber attacks, could (i) disrupt the
proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; (ii) result
in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise
valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data breach and other laws,
subjecting us to additional regulatory scrutiny and exposing us to civil litigation, governmental fines and possible financial
liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm our
reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence of any of the
foregoing could have a material adverse effect on our business, financial condition and results of operations.

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Our Operations Rely On Certain External Vendors

We rely on certain vendors to provide products and services necessary to maintain the day-to-day operations of First
Commonwealth and FCB. In particular, we contracted with an external vendor for our core processing system used to maintain
customer and account records, reflect account transactions and activity, and support our customer relationship management
systems for substantially all of our deposit and loan customers. Accordingly, our operations are exposed to risk that these
vendors will not perform in accordance with the contracted arrangements under service level agreements. The failure of an
external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes
in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for
any other reason, could be disruptive to First Commonwealth’s operations and financial reporting, which could have a material
adverse effect on First Commonwealth’s business and, in turn, First Commonwealth’s financial condition and results of
operations.

In addition, our operations are exposed to risk that these vendors will not perform in accordance with the contracted
arrangements under service level agreements. Although we have selected these external vendors carefully, we do not control
their actions. The failure of an external vendor to perform in accordance with the contracted arrangements under service level
agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and
services or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse
effect on our business and, in turn, our financial condition and results of operations. Replacing these external vendors could also
entail significant delay and expense.

We Depend on the Accuracy and Completeness of Information About Customers and Counterparties

In deciding whether to extend credit or enter into other transactions, we rely on information furnished by or on behalf of
customers and counterparties, including financial statements, credit reports and other financial information. We also rely on
representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and
completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial
information could have a material adverse impact on our business, financial condition and results of operations.

External and Market-Related Risks

We are Subject to Risk Arising from The Soundness of Other Financial Institutions and Counterparties

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have
exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial
services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of
these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be
exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full
amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our business,
financial condition and results of operations.

Competition from Other Financial Institutions in Originating Loans, Attracting Deposits and Providing Various Financial
Services May Adversely Affect Our Profitability.

We face substantial competition in originating loans and attracting deposits. This competition comes principally from other
banks, savings institutions, mortgage banking companies and credit unions, as well as institutions offering uninsured investment
alternatives, including money market funds. Many of our competitors enjoy advantages, including greater financial resources
and higher lending limits, better brand recognition, a wider geographic presence, more accessible branch office locations, the
ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs.
These competitors may offer more favorable pricing through lower interest rates on loans or higher interest rates on deposits,
which could force us to match competitive rates and thereby reduce our net interest income.

Compliance and Regulatory Risks

We are Subject to Extensive Government Regulation and Supervision

Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system
as a whole, not security holders. These regulations affect our lending practices, capital structure, investment practices, dividend
policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations
and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or
implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could
subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-
banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies
or supervisory guidance could result in enforcement and other legal actions by Federal or state authorities, including criminal
and civil penalties, the loss of FDIC insurance, the revocation of a banking charter, other sanctions by regulatory agencies, civil
money penalties and/or reputational damage. In this regard, government authorities, including the bank regulatory agencies, are

20

pursuing aggressive enforcement actions with respect to compliance and other legal matters involving financial activities, which
heightens the risks associated with actual and perceived compliance failures. See “Supervision and Regulation” included in
Item 1. Business for a more detailed description of the regulatory requirements applicable to First Commonwealth.

Risks Related to Acquisition Activity

Potential Acquisitions May Disrupt Our Business and Dilute Stockholder Value

We generally seek merger or acquisition partners that are culturally similar and have experienced management and possess
either significant market presence or have potential for improved profitability through financial management, economies of
scale or expanded services. Acquiring other banks, businesses, or branches involves various risks commonly associated with
acquisitions, including, among other things, (i) potential exposure to unknown or contingent liabilities of the target company;
(ii) exposure to potential asset quality issues of the target company; (iii) potential disruption to our business; (iv) potential
diversion of our management’s time and attention; (v) the possible loss of key employees and customers of the target company;
(vi) difficulty in estimating the value of the target company; and (vii) potential changes in banking or tax laws or regulations
that may affect the target company.

Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our
tangible book value and net income per common share may occur in connection with any future transaction. Furthermore,
failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other
projected benefits from an acquisition could have a material adverse effect on our business, financial condition and results of
operations.

Acquisitions May Be Delayed, Impeded, or Prohibited Due to Regulatory Issues

Acquisitions by financial institutions, including us, are subject to approval by a variety of federal and state regulatory agencies
(collectively, “regulatory approvals”). The process for obtaining these required regulatory approvals has become substantially
more difficult since the global financial crisis, and our ability to engage in certain merger or acquisition transactions depends on
the bank regulators' views at the time as to our capital levels, quality of management, and overall condition, in addition to their
assessment of a variety of other factors, including our compliance with law. Regulatory approvals could be delayed, impeded,
restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies,
including, without limitation, issues related to Bank Secrecy Act compliance, Community Reinvestment Act issues, fair lending
laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and
regulations. We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a
result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable
conditions or at all. Difficulties associated with potential acquisitions that may result from these factors could have a material
adverse effect on our business, financial condition and results of operations.

Risks Associated with Our Common Stock

The Trading Volume in Our Common Stock Is Less Than That of Other Larger Financial Services Companies

Although First Commonwealth’s common stock is listed for trading on the NYSE, the trading volume in its common stock is
less than that of other, larger financial services companies. A public trading market having the desired characteristics of depth,
liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of First Commonwealth’s
common stock at any given time. This presence depends on the individual decisions of investors and general economic and
market conditions over which we have no control. Given the lower trading volume of First Commonwealth’s common stock,
significant sales of First Commonwealth’s common stock, or the expectation of these sales, could cause First Commonwealth’s
stock price to fall.

First Commonwealth May Not Continue to Pay Dividends on Its Common Stock in The Future

Holders of First Commonwealth common stock are only entitled to receive such dividends as its board of directors may declare
out of funds legally available for such payments. Although First Commonwealth has historically declared cash dividends on its
common stock, it is not required to do so and may reduce or eliminate its common stock dividend in the future. This could
adversely affect the market price of First Commonwealth’s common stock. Also, First Commonwealth is a bank holding
company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the
guidelines of the FRB regarding capital adequacy and dividends.

As more fully discussed in Part II, Item 8, Financial Statements and Supplementary Data-Note 23, Regulatory Restrictions and
Capital Adequacy, which is located elsewhere in this report, the ability of First Commonwealth to declare or pay dividends on
its common stock may also be subject to certain restrictions in the event that First Commonwealth elects to defer the payment of
interest on its junior subordinated debt securities.

An Investment in Our Common Stock Is Not an Insured Deposit

Our common stock is not a bank deposit and, therefore, is not insured against loss by the Federal Deposit Insurance Corporation
(FDIC), any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently

21

risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market
forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose
some or all of your investment.

Provisions of Our Articles of Incorporation, Bylaws and Pennsylvania Law, as Well as State and Federal Banking Regulations,
Could Delay or Prevent a Takeover of Us by a Third Party.

Provisions in our articles of incorporation and bylaws, the corporate law of the Commonwealth of Pennsylvania, and state and
federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders,
or otherwise adversely affect the price of our common stock. These provisions include, among other things, advance notice
requirements for proposing matters that shareholders may act on at shareholder meetings. In addition, under Pennsylvania law,
we are prohibited from engaging in a business combination with any interested shareholder for a period of five years from the
date the person became an interested shareholder unless certain conditions are met. These provisions may discourage potential
takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price
of, and the voting and other rights of the holders of, our common stock.

Risks Related to the COVID-19 Pandemic

Our Business, Financial Condition, Liquidity and Results of Operations May Be Adversely Affected by the COVID-19
Pandemic.

The COVID-19 pandemic created economic and financial disruptions that adversely affected our business, financial condition,
liquidity and results of operations. While the pandemic-related restrictions imposed by state and local governments have largely
been lifted, COVID-19 continues to disrupt business and negatively impact consumer and business confidence. The extent to
which the COVID-19 pandemic will continue to negatively affect our business, financial condition, liquidity and results of
operations will depend on future developments, which are highly uncertain and cannot be predicted and many of which are
outside of our control, including the scope and duration of the pandemic, the effectiveness of our business continuity and health
emergency response plans, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties
and service providers, as well as other market participants, and actions taken, or that may yet be taken, or inaction, by
governmental authorities and other third parties in response to the pandemic. Any disruption to our ability to deliver financial
products or services to, or interact with, our clients and customers could result in losses or increased operational costs,
regulatory fines, penalties and other sanctions, or harm our reputation.

General Risk Factors

We are Subject to Risk from Fluctuating Conditions in the Financial Markets and Economic and Political Conditions Generally

Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as
governmental monetary policies. Our financial performance generally, and in particular the ability of borrowers to pay interest
on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and
other products and services we offer, is highly dependent upon the business environment in the markets where we operate and
in the United States as a whole. A favorable business environment is generally characterized by, among other factors, economic
growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business
earnings. Unfavorable or uncertain economic and market conditions can be caused by a decline in economic growth both in the
U.S. and internationally; declines in business activity or investor or business confidence; limitations on the availability of or
increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; oil price volatility; natural
disasters; trade policies and tariffs; or a combination of these or other factors. While recent economic conditions in the United
States and worldwide have seen improving trends since the onset of the COVID-19 pandemic, there can be no assurance that
this improvement will continue. Economic pressure on consumers and uncertainty regarding continuing economic improvement
could result in changes in consumer and business spending, borrowing and savings habits. Such conditions could have a
material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.

Changes in The Federal, State or Local Tax Laws May Negatively Impact Our Financial Performance and We Are Subject to
Examinations and Challenges by Tax Authorities

We are subject to federal and applicable state tax laws and regulations. Changes in these tax laws and regulations, some of
which may be retroactive to previous periods, could increase our effective tax rates and, as a result, could negatively affect our
current and future financial performance. Furthermore, tax laws and regulations are often complex and require interpretation. In
the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state tax
authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we
have engaged. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions
taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll,
property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax
authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income
among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse
effect on our business, financial condition and results of operations.

22

We May Need to Raise Additional Capital in The Future, and Such Capital May Not Be Available When Needed or at All

We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our
commitments and business needs, particularly if our asset quality or earnings were to deteriorate significantly. Our ability to
raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are
outside of our control, and our financial condition. Economic conditions and the loss of confidence in financial institutions may
increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings,
repurchase agreements and borrowings from the discount window of the Federal Reserve.

We cannot assure that such capital will be available on acceptable terms or at all. Any occurrence that may limit our access to
the capital markets, such as a decline in the confidence of debt purchasers, depositors of FCB or counterparties participating in
the capital markets, or a downgrade of First Commonwealth’s or FCB’s debt ratings, may adversely affect our capital costs and
our ability to raise capital and, in turn, our liquidity. Moreover, if we need to raise capital in the future, we may have to do so
when many other financial institutions are also seeking to raise capital and would have to compete with those institutions for
investors. An inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our
business, financial condition and results of operations.

Our Stock Price Can Be Volatile

Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find
attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things, (i) actual
or anticipated variations in quarterly results of operations; (ii) recommendations by securities analysts; (iii) operating and stock
price performance of other companies that investors deem comparable to us; (iv) news reports relating to trends, concerns and
other issues in the financial services industry; (v) perceptions in the marketplace regarding us and/or our competitors; (vi) new
technology used, or services offered, by competitors; (vii) the issuance by us of additional securities, including common stock
and securities that are convertible into or exchangeable for, or that represent the right to receive, common stock; (viii) sales of a
large block of shares of our common stock or similar securities in the market after an equity offering, or the perception that
such sales could occur; (ix) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving us or our competitors; (x) failure to integrate acquisitions or realize anticipated benefits from
acquisitions; (xi) changes in government regulations; and (xii) geopolitical conditions such as acts or threats of terrorism or
military conflicts.

General market fluctuations, including real or anticipated changes in the strength of the economy; industry factors and general
economic and political conditions and events, such as economic slowdowns or recessions; and interest rate changes, oil price
volatility or credit loss trends could also cause our stock price to decrease regardless of operating results.

Changes in Accounting Standards Could Materially Impact Our Financial Statements

From time to time accounting standards setters change the financial accounting and reporting standards that govern the
preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and
report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard
retroactively, resulting in changes to previously reported financial results or a cumulative charge to retained earnings. See New
Accounting Pronouncements at the end of Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations elsewhere in this report for further information regarding pending accounting standards updates.

We May Not Be Able to Attract and Retain Skilled People

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in many
activities engaged in by us is intense and we may not be able to hire people or to retain them. We do not currently have
employment agreements or non-competition agreements with any of our senior officers. The unexpected loss of services of key
personnel could have a material adverse impact on our business, financial condition and results of operations because of their
customer relationships, skills, knowledge of our market, years of industry experience and the difficulty of promptly finding
qualified replacement personnel. In addition, the scope and content of U.S. banking regulators' policies on incentive
compensation, as well as changes to these policies, could adversely affect our ability to hire, retain and motivate our key
employees.

ITEM 1B.

Unresolved Staff Comments

None.

ITEM 2.

Properties

Our principal office is located in the old Indiana County courthouse complex, consisting of the former courthouse building and
the former sheriff’s residence and jail building for Indiana County. This certified Pennsylvania and national historic landmark
was built in 1870 and restored by us in the early 1970s. We lease the complex from Indiana County pursuant to a lease
agreement that was originally signed in 1973 and has a current term that expires in 2048.

23

The majority of our administrative personnel are also located in two owned buildings in Indiana, Pennsylvania, each of which is
in close proximity to our principal office.

First Commonwealth Bank has 118 community banking offices, of which 44 are leased and 74 are owned. We also lease two
mortgage loan production offices and four corporate loan production offices.

While these facilities are adequate to meet our current needs, available space is limited and additional facilities may be required
to support future expansion. However, we have no significant plans to lease, purchase or construct additional administrative
facilities.

ITEM 3.

Legal Proceedings

The information required by this Item is set forth in Part II, Item 8, Note 20, “Contingent Liabilities,” which is incorporated
herein by reference in response to this item.

ITEM 4.

Mine Safety Disclosures

Not applicable.

24

Executive Officers of First Commonwealth Financial Corporation

The name, age and principal occupation for each of the executive officers of First Commonwealth Financial Corporation as of
December 31, 2021 is set forth below:

Jane Grebenc, age 63, has served as Executive Vice President and Chief Revenue Officer of First Commonwealth Financial
Corporation and President of First Commonwealth Bank since May 31, 2013. Ms. Grebenc's financial services career includes
executive leadership roles at a variety of institutions, including Park View Federal Savings Bank, Key Bank, and National City
Bank. She was formerly the Executive Vice President in charge of the retail, marketing, IT and operations and the mortgage
segments at Park View Federal Savings Bank from 2009 until 2012, the Executive Vice President in charge of the Wealth
Segment at Key Bank from 2007 until 2009 and the Executive Vice President / Branch Network at National City Bank prior to
2007.

Brian Karrip, age 61, has served as Executive Vice President and Chief Credit Officer of First Commonwealth Bank since
September 2016. Prior to joining First Commonwealth, Mr. Karrip served as Executive Vice President, Specialized Lending
for FirstMerit Bank. Prior to joining FirstMerit Bank, Mr. Karrip served as Managing Director and Group Head of Loan
Syndications and Sales at KeyBanc Capital Markets. Mr. Karrip’s financial services career also includes 16 years with National
City Bank where he held a variety of roles in the commercial lending division and served as Regional President of Michigan
and Illinois.

Leonard V. Lombardi, age 62, has served as Executive Vice President and Chief Audit Executive of First Commonwealth
Financial Corporation since January 1, 2009. He was formerly Senior Vice President / Loan Review and Audit Manager.

Norman J. Montgomery, age 54, has served as the Executive Vice President of Business Integration of First Commonwealth
Bank since May 2011. He oversees First Commonwealth’s product development and assumed oversight of First
Commonwealth’s technology and operations functions in July 2012. He served as Senior Vice President/Business Integration of
First Commonwealth Bank from September 2007 until May 2011 and previously held positions in the technology, operations,
audit and marketing areas.

T. Michael Price, age 59, has served as President and Chief Executive Officer of First Commonwealth Financial Corporation
and Chief Executive Officer of First Commonwealth Bank since March 2012. Mr. Price served as President of First
Commonwealth Bank from November 2007 to May 2013. From January 1, 2012 to March 7, 2012, he served as Interim
President and Chief Executive Officer of First Commonwealth Financial Corporation. He was formerly Chief Executive Officer
of the Cincinnati and Northern Kentucky Region of National City Bank from July 2004 to November 2007 and Executive Vice
President and Head of Small Business Banking of National City Bank prior to July 2004.

James R. Reske, age 58, joined First Commonwealth Financial Corporation as Executive Vice President, Chief Financial
Officer and Treasurer on April 28, 2014. Prior to joining First Commonwealth, Mr. Reske served as Executive Vice President,
Chief Financial Officer, and Treasurer at United Community Financial Corporation in Youngstown, Ohio from 2008 until April
2014. Mr. Reske's financial services career includes investment banking roles within the Financial Institutions Groups at
Keybanc Capital Markets, Inc. in Cleveland, Ohio and at Morgan Stanley & Company in New York. Mr. Reske also provided
expertise and counsel to financial institutions and other organizations on mergers and acquisitions and capital markets activities
as an attorney at Wachtell, Lipton, Rosen & Katz, as well as at Sullivan & Cromwell. Earlier in his career, Mr. Reske worked at
the Board of Governors of the Federal Reserve System in Washington, DC and at the Federal Reserve Bank of Boston.

Carrie L. Riggle, age 52, has served as Executive Vice President / Human Resources since March 1, 2013. Ms. Riggle has been
with First Commonwealth for 30 years. Over the course of her tenure, Ms. Riggle has been responsible for the daily operations
of the Human Resources function and was actively involved in the establishment and development of a centralized corporate
human resources function within the Company.

Matthew C. Tomb, age 45, has served as Executive Vice President, Chief Risk Officer and General Counsel of First
Commonwealth Financial Corporation since November 2010. He previously served as Senior Vice President / Legal and
Compliance since September 2007. Before joining First Commonwealth, Mr. Tomb practiced law with Sherman & Howard
L.L.C. in Denver, Colorado.

25

PART II

ITEM 5.
Securities

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity

First Commonwealth is listed on the NYSE under the symbol “FCF.” As of December 31, 2021, there were approximately
5,518 holders of record of First Commonwealth’s common stock. The table below sets forth the high and low sales prices per
share and cash dividends declared per share for common stock of First Commonwealth for each quarter during the last two
fiscal years.

Period
2021
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Period
2020
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

High Sale

Low Sale

Cash Dividends
Per Share

$

15.51

$

10.88

$

15.54

14.08

16.16

13.77

12.45

13.99

0.110

0.115

0.115

0.115

High Sale

Low Sale

Cash Dividends
Per Share

$

14.62

$

9.98

8.75

10.94

$

8.20

7.07

7.16

7.82

0.110

0.110

0.110

0.110

Federal and state regulations contain restrictions on the ability of First Commonwealth to pay dividends. For information
regarding restrictions on dividends, see Part I, Item 1 “Business—Supervision and Regulation—Dividends” and Part II, Item 8,
“Financial Statements and Supplementary Data—Note 23, Regulatory Restrictions and Capital Adequacy.” In addition, under
the terms of the capital securities issued by First Commonwealth Capital Trust II and III, First Commonwealth could not pay
dividends on its common stock if First Commonwealth deferred payments on the junior subordinated debt securities that
provide the cash flow for the payments on the capital securities.

26

The following five-year performance graph compares the cumulative total shareholder return (assuming reinvestment of
dividends) on First Commonwealth’s common stock to the S&P U.S. BMI Banks Index and the Russell 2000 Index. The S&P
U.S. BMI Banks Index replaced the SNL U.S. Bank Index, which was used in prior years, because the SNL U.S. Bank index
has been discontinued. The stock performance graph assumes $100 was invested on December 31, 2016, and the cumulative
return is measured as of each subsequent fiscal year end.

Index
First Commonwealth Financial Corporation

Russell 2000 Index

S&P U.S. BMI Banks Index

12/31/2016

12/31/2017

12/31/2018

12/31/2019

12/31/2020

12/31/2021

100.00

100.00

100.00

103.40

114.65

118.21

89.30

102.02

98.75

110.43

128.06

135.64

87.36

153.62

118.33

132.73

176.39

160.89

Period Ending

Unregistered Sales of Equity Securities and Use of Proceeds

The following table details the amount of shares repurchased during the fourth quarter of 2021.

Month Ending:
October 31, 2021

November 30, 2021

December 31, 2021

Total

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

62,803 $

384,100

553,570

1,000,473 $

13.96

15.60

15.25

15.30

62,803

384,100

553,570

1,000,473

2,248,073

1,889,853

1,240,850

For additional information, please see Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters." Information called for by this item concerning security ownership of certain beneficial
owners and security ownership of management will be included in the Proxy Statement under the headings “Stock Ownership
of Certain Beneficial Owners” and “Stock Ownership of Directors and Management,” and is incorporated herein by reference.

ITEM 6.

[Reserved]

27

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis represents an overview of the financial condition and the results of operations of First
Commonwealth, and its subsidiaries, as of and for the years ended December 31, 2021, and 2020. The purpose of this
discussion is to focus on information concerning our financial condition and results of operations that is not readily apparent
from the Consolidated Financial Statements. In order to obtain a more thorough understanding of this discussion, you should
refer to the Consolidated Financial Statements, the notes thereto and other financial information presented in this Annual
Report. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our
Annual Report on Form 10-K filed with the SEC on March 1, 2021 for a discussion and analysis of the factors that affected
periods prior to 2020.

Company Overview

First Commonwealth provides a diversified array of consumer and commercial banking services through our bank subsidiary,
FCB. We also provide trust and wealth management services through FCB and insurance products through FCIA. At December
31, 2021, FCB operated 118 community banking offices throughout western and central Pennsylvania and northeastern, central
and southwestern Ohio, as well as loan production offices in Pittsburgh, Pennsylvania, and Cleveland, Columbus, Canton,
Lewis Center, Hudson and Westlake, Ohio.

Our consumer services include Internet, mobile and telephone banking, an automated teller machine network, personal
checking accounts, interest-earning checking accounts, savings accounts, health savings accounts, insured money market
accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and
unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft
checking protection and IRA accounts. Commercial banking services include commercial lending, small and high-volume
business checking accounts, on-line account management services, ACH origination, payroll direct deposit, commercial cash
management services and repurchase agreements. We also provide a variety of trust and asset management services and a full
complement of auto, home and business insurance as well as term life insurance. We offer annuities, mutual funds and stock
and bond brokerage services through an arrangement with a broker-dealer and insurance brokers. Most of our commercial
customers are small and mid-sized businesses in Pennsylvania and Ohio.

As a financial institution with a focus on traditional banking activities, we earn the majority of our revenue through net interest
income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings.
Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing our net interest margin,
which is net interest income (on a fully taxable-equivalent basis) as a percentage of our average interest-earning assets. We also
generate revenue through fees earned on various services and products that we offer to our customers and, less frequently,
through sales of assets, such as loans, investments or properties. These revenue sources are offset by provisions for credit losses
on loans, operating expenses, income taxes and, less frequently, loss on sale or other-than-temporary impairments on
investment securities.

General economic conditions also affect our business by impacting our customers’ need for financing, thus affecting loan
growth, as well as impacting the credit strength of existing and potential borrowers.

Critical Accounting Policies and Significant Accounting Estimates

First Commonwealth’s accounting and reporting policies conform to accounting principles generally accepted in the United
States of America (“GAAP”) and predominant practice in the banking industry. The preparation of financial statements in
accordance with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in
the financial statements and accompanying notes. Over time, these estimates, assumptions and judgments may prove to be
inaccurate or vary from actual results and may significantly affect our reported results and financial position for the period
presented or in future periods. We currently view the determination of the allowance for credit losses to be critical because it is
highly dependent on subjective or complex judgments, assumptions and estimates made by management.

Allowance for Credit Losses

We account for the credit risk associated with our lending activities through the allowance and provision for credit losses. The
allowance represents management’s best estimate of expected losses in our existing loan portfolio as of the balance sheet date.
The provision is a periodic charge to earnings in an amount necessary to maintain the allowance at a level that is appropriate

28

based on management’s assessment of expected losses. Management determines and reviews with the Board of Directors the
appropriateness of the allowance on a quarterly basis in accordance with the methodology described below.

•

•

•

Loans are segmented into groups with similar characteristics and risks and an allowance for credit losses is calculated
for each segment based on the estimate of credit losses.

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 includes a forecast of macroeconomic factors, using a weighted
forecast from a nationally recognized firm.

Loans that do not have the same risks and characteristics of the loan pools are individually reviewed. These are
generally large balance commercial loans and commercial mortgages that are rated less than “satisfactory” based on our
internal credit-rating process.

• We assess whether the loans identified for review are “nonperforming,”. This means it is expected that all amounts will

not be collected according to the contractual terms of the loan agreement, which generally represents loans that
management has placed on nonaccrual status and accruing troubled debt restructurings.

•

For individually analyzed loans we calculate the estimated fair value of the loans that are selected for review based on
observable market prices, discounted cash flows or the value of the underlying collateral and record an allowance if
needed.

• We then review the results to determine the appropriate balance of the allowance for credit losses. This review includes
consideration of additional factors, such as the mix of loans in the portfolio, the balance of the allowance relative to
total loans and nonperforming assets, trends in the overall risk profile in the portfolio, trends in delinquencies and
nonaccrual loans, and local and national economic information and industry data, including trends in the industries we
believe are higher risk.

There are many factors affecting the allowance for credit losses; some are quantitative, while others require qualitative
judgment. These factors require the use of estimates related to the amount and timing of expected future cash flows, appraised
values on nonperforming loans, estimated losses for each loan category based on historical loss experience, forecasts of
economic trends and conditions, all of which may be susceptible to significant judgment and change. To the extent that actual
outcomes differ from estimates, additional provisions for credit losses could be required that could adversely affect our earnings
or financial position in future periods.

29

Selected Financial Information

The following table provides selected financial information for the periods ended December 31,

Interest income

Interest expense

Net interest income

Provision for credit losses

Net interest income after provision for
credit losses

Net securities gains (losses)

Other income

Other expenses

Income before income taxes

Income tax provision

Net Income

Per Share Data—Basic

Net Income

Dividends declared

2021

2020

2019

2018

2017

(dollars in thousands, except share data)

$

293,838

$

301,209

$

325,264

$

292,257

$

250,550

15,297

278,541

(1,376)

32,938

268,271

56,718

55,402

269,862

14,533

279,917

211,553

255,329

16

106,741

213,857

172,817

34,560

138,257

1.45

0.455

$

$

$

70

94,406

215,826

90,203

16,756

73,447

0.75

0.440

$

$

$

22

85,463

209,965

130,849

25,516

105,333

1.07

0.400

$

$

$

40,035

252,222

12,531

239,691

8,102

80,535

195,556

132,772

25,274

107,498

1.09

0.350

$

$

$

21,770

228,780

5,087

223,693

5,040

75,291

200,298

103,726

48,561

55,165

0.58

0.320

$

$

$

Average shares outstanding

95,583,890

97,499,586

98,317,787

99,036,163

95,220,056

Per Share Data—Diluted

Net Income

$

1.44

$

0.75

$

1.07

$

1.08

$

0.58

Average shares outstanding

95,840,285

97,758,965

98,588,164

99,223,513

95,331,037

At End of Period

Total assets

$ 9,545,093

$ 9,068,104

$ 8,308,773

$ 7,828,255

$ 7,308,539

Investment securities

1,595,529

1,205,294

1,256,176

1,335,228

1,183,291

Loans and leases, net of unearned
income
Allowance for credit losses

Deposits

Short-term borrowings

Subordinated debentures

Other long-term debt

Shareholders’ equity

Key Ratios

Return on average assets

Return on average equity

Net loans to deposits ratio

Dividends per share as a percent of
net income per share
Average equity to average assets ratio

6,839,230

6,761,183

6,189,148

5,774,139

5,407,376

92,522

101,309

51,637

47,764

7,982,498

7,438,666

6,677,615

5,897,992

138,315

170,775

5,573

117,373

170,612

56,258

201,853

170,450

56,917

1,109,372

1,068,617

1,055,665

721,823

170,288

7,551

975,389

48,298

5,580,705

707,466

72,167

8,161

888,127

1.47 %

0.82 %

1.31 %

1.42 %

0.77 %

12.55

84.52

31.38

11.72

6.82

89.53

58.67

12.00

10.32

91.91

37.38

12.71

11.41

97.09

32.11

12.47

6.45

96.03

55.17

11.86

Results for 2021 and 2020 reflect accounting for the allowance for credit losses under the current expected credit loss
methodology, while results prior to 2020 reflect accounting under the incurred methodology.

Results of Operations—2021 Compared to 2020

Net Income

Net income for 2021 was $138.3 million, or $1.44 per diluted share, as compared to net income of $73.4 million, or $0.75 per
diluted share in 2020. The increase in net income was the result of a $58.1 million decline in provision for credit losses and an
increase of $10.3 million and $12.3 million in net interest income and noninterest income, respectively.

30

Our return on average equity was 12.6% and our return on average assets was 1.47% for 2021, compared to 6.8% and 0.82%,
respectively, for 2020.

Average diluted shares for the year 2021 were 2% less than the comparable period in 2020 primarily due to $31.3 million of
common stock buybacks completed during 2021.

Net Interest Income

Net interest income, which is our primary source of revenue, is the difference between interest income from earning assets
(loans and securities) and interest expense paid on liabilities (deposits, short-term borrowings and long-term debt). The amount
of net interest income is affected by both changes in the level of interest rates and the amount and composition of interest-
earning assets and interest-bearing liabilities. The net interest margin is expressed as the percentage of net interest income, on a
fully taxable equivalent basis, to average interest-earning assets. To compare the tax exempt asset yields to taxable yields,
amounts are adjusted to the pretax equivalent amounts based on the marginal corporate federal income tax rate of 21%. The
taxable equivalent adjustment to net interest income for 2021 was $1.1 million compared to $1.5 million in 2020. Net interest
income comprises a majority of our operating revenue (net interest income before provision expense plus noninterest income) at
72% and 74% for the years ended December 31, 2021 and 2020, respectively.

Net interest income, on a fully taxable equivalent basis, was $279.6 million for the year-ended December 31, 2021, a $9.9
million, or 4%, increase compared to $269.7 million for the same period in 2020. The net interest margin, on a fully taxable
equivalent basis, decreased 6 basis points to 3.26% in 2021 from 3.32% in 2020. The net interest margin is affected by both
changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The impact of growth in interest-earning assets in 2021 was offset by the effect of the mix of the asset growth and lower interest
rates, resulting in a decrease in the net interest margin for the year ended December 31, 2021. Average earning assets for the
year ended December 31, 2021 increased $458.5 million, or 6%, compared to the year ended December 31, 2020. The change
in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $12.2 million
in the year ended December 31, 2021 compared to the same period in 2020, while changes in rates negatively impacted net
interest income by $2.3 million. Interest-sensitive assets totaling $4.6 billion will either reprice or mature over the next twelve
months.

The taxable equivalent yield on interest-earning assets was 3.43% for the year ended December 31, 2021, a decrease of 29 basis
points from the 3.72% yield for the same period in 2020. This change is primarily due to a decrease in the yield on our
adjustable and variable rate commercial loan portfolios, which decreased by 56 basis points largely due to loans repricing in a
lower interest rate environment after the Federal Reserve decreased short-term interest rates by 150 basis points in the first
quarter of 2020. Also contributing to this decline was the yield on the investment portfolio, which decreased by 41 basis points
compared to the prior year.

The loan yield for the year ended December 31, 2021 decreased 14 basis points and was impacted by $312.7 million in average
Paycheck Protection Program ("PPP") loans outstanding during the period. These loans were originated under the Coronavirus
Aid, Relief, and Economic Security Act ("CARES Act") and had a stated loan rate of 1% and a yield of 7.4% and 3.2% for the
years ended December 31, 2021 and December 31, 2020, respectively. The yield on PPP loans includes the recognition of PPP
loan deferred processing fees, net of deferred origination costs, of $19.9 million for the year ended December 31, 2021 and $8.4
million for the year ended December 31, 2020. These amounts are recognized in interest income as a yield adjustment over the
life of the loan with accelerated recognition when a loan is forgiven or paid off. As of December 31, 2021, we expect to
recognize additional PPP-related deferred processing fees, net of origination costs, of approximately $2.6 million as an
adjustment to yield over the remaining life of the loans. At December 31, 2021, the balance of PPP loans outstanding totaled
$71.3 million. PPP loans generated $23.2 million in income during the year ended December 31, 2021 and increased both the
yield on total loans and the net interest margin by 16 basis points. During the year ended December 31, 2020, PPP loans
generated $12.1 million in income decreasing the loan portfolio yield by 6 basis points and the net interest margin by 1 basis
point. During the year ended December 31, 2021, the Company originated $255.8 million in new PPP loans and processed
forgiveness on $764.0 million of PPP loans.

The investment portfolio yield decreased 41 basis points in comparison to the prior year as a result of the decrease in short-term
interest rates. Investment portfolio purchases during the year ended December 31, 2021 have been primarily in obligations of
U.S. government agencies, obligations of other government-sponsored enterprises and obligations of states and political
subdivisions with durations of approximately four to five years and corporate bonds with a duration of nine years. Additionally,
as a result of excess liquidity caused by significant growth in deposits, the average balance of interest-bearing deposits with
banks has increased from $179.2 million in 2020 to $317.5 million in 2021. The impact of the level and rate paid on interest-
bearing deposits with banks decreased the yield on interest-earnings assets by 13 basis points for the year ended December 31,
2021.

31

Decreases in the cost of interest-bearing liabilities offset the negative impact of lower yields on interest-earning assets. The cost
of interest-bearing liabilities was 0.27% for the year-ended December 31, 2021, compared to 0.58% for the same period in
2020. Lower market interest rates resulted in the cost of interest-bearing deposits decreasing 31 basis points and short-term
borrowings decreasing 41 basis points in comparison to the same period in the prior year. Deposit growth contributed to a
decline in average short-term borrowings of $22.8 million for the year ended December 31, 2021 compared to the same period
in 2020. Average long-term debt decreased $32.7 million, while the cost of long-term debt increased by 31 basis points due to
the maturity of lower costing borrowings.

Comparing the year ended December 31, 2021 with the same period in 2020, changes in rates negatively impacted net interest
income by $2.3 million. The lower yield on interest-earning assets decreased net interest income by $15.3 million, while the
decrease in the cost of interest-bearing liabilities positively impacted net interest income by $13.1 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by
$12.2 million in the year ended December 31, 2021 compared to the same period in 2020. Higher levels of interest-earning
assets resulted in an increase of $7.6 million in interest income, and changes in the volume of interest-bearing liabilities
decreased interest expense by $4.6 million, primarily due to decreases in long-term borrowings and time deposits.

Positively affecting net interest income was a $531.5 million increase in average net free funds at December 31, 2021 as
compared to December 31, 2020. Average net free funds are the excess of noninterest-bearing demand deposits, other
noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The largest component of the increase in
net free funds was a $479.0 million increase in average noninterest-bearing demand deposits primarily due to deposit growth
related to PPP loan proceeds. Average time deposits for the year ended December 31, 2021 decreased $277.3 million, or 38%,
compared to the comparable period in 2020, while the average rate paid on time deposits decreased 91 basis points. Over the
next twelve months, $276.0 million in certificates of deposits are scheduled to mature.

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 periods presented:

For the Years Ended December 31,

2021

2020

2019

(dollars in thousands)

Interest income per Consolidated Statements of Income

$

293,838

$

301,209

$

325,264

Adjustment to fully taxable equivalent basis

Interest income adjusted to fully taxable equivalent basis (non-GAAP)

Interest expense

1,100

294,938

15,297

1,462

302,671

32,938

1,748

327,012

55,402

Net interest income adjusted to fully taxable equivalent basis (non-GAAP)

$

279,641

$

269,733

$

271,610

32

The following table provides information regarding the average balances and yields or rates on interest-earning assets and
interest-bearing liabilities for the periods ended December 31:

Average Balance Sheets and Net Interest Analysis

2021

2020

2019

Average
Balance

Income /
Expense (a)

Yield
or
Rate

Average
Balance

Income /
Expense (a)

(dollars in thousands)

Yield
or
Rate

Average
Balance

Income /
Expense (a)

Yield
or
Rate

Assets

Interest-earning assets:

Interest-bearing deposits with
banks

$

317,493

$

Tax-free investment securities

28,139

400

753

Taxable investment securities

1,463,785

25,244

Loans, net of unearned

income (b)(c)(e)

Total interest-earning assets

Noninterest-earning assets:

Cash

Allowance for credit losses

Other assets

Total noninterest-earning
assets

Total Assets

Liabilities and Shareholders’
Equity

Interest-bearing liabilities:

Interest-bearing demand
deposits (d)

Savings deposits (d)

Time deposits

Short-term borrowings

Long-term debt

Total interest-bearing
liabilities

Noninterest-bearing liabilities and
shareholders’ equity:

Noninterest-bearing demand
deposits (d)

Other liabilities

Shareholders’ equity

Total noninterest-bearing
funding sources

Total Liabilities and
Shareholders’ Equity

Net Interest Income and Net Yield
on Interest-Earning Assets

0.13 % $

179,180

$

218

0.12 % $

15,778

$

403

2.55 %

2,014

31,381

293,214

327,012

3.08

2.66

4.90

4.51

2.68

1.72

3.96

3.43

44,308

1,167,316

6,737,339

8,128,143

97,632

(76,705)

825,510

846,437

$ 8,974,580

1,333

24,749

276,371

302,671

3.01

2.12

4.10

3.72

65,345

1,180,698

5,987,398

7,249,219

93,953

(51,274)

738,154

780,833

$ 8,030,052

6,777,192

8,586,609

268,541

294,938

94,949

(101,399)

813,905

807,455

$ 9,394,064

$ 1,529,697

$

434

0.03 % $ 1,525,195

$

1,843

0.12 % $ 1,293,588

$

7,025

0.54 %

3,282,307

449,452

119,801

200,961

3,111

2,204

99

9,449

0.09

0.49

0.08

4.70

3,027,016

726,702

142,634

233,701

9,966

10,163

704

10,262

0.33

1.40

0.49

4.39

2,597,674

864,056

391,547

216,383

15,180

14,520

8,298

10,379

0.58

1.68

2.12

4.80

5,582,218

15,297

0.27

5,655,248

32,938

0.58

5,363,248

55,402

1.03

2,580,460

130,007

1,101,379

3,811,846

2,101,412

140,612

1,077,308

3,319,332

1,549,507

96,896

1,020,401

2,666,804

$ 9,394,064

$ 8,974,580

$ 8,030,052

$

279,641

3.26 %

$

269,733

3.32 %

$

271,610

3.75 %

Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.
Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets.

(a)
(b)
(c) Loan income includes loan fees.
(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.
Includes held for sale loans.

(e)

33

The following table sets forth certain information regarding changes in net interest income attributable to changes in the volume
of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated:

Analysis of Year-to-Year Changes in Net Interest Income

2021 Change from 2020

2020 Change from 2019

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)

Interest-earning assets:

Interest-bearing deposits with
banks
Tax-free investment securities

Taxable investment securities

Loans

Total interest income (b)

Interest-bearing liabilities:

Interest-bearing demand
deposits
Savings deposits

Time deposits

Short-term borrowings

Long-term debt

Total interest expense

Net interest income

$

182

$

166

$

16

$

(185) $

4,167

$

(4,352)

(580)

495

(7,830)

(7,733)

(1,409)

(6,855)
(7,959)

(605)

(813)

(17,641)

(487)

6,285

1,634

7,598

5

842
(3,882)

(112)

(1,437)

(4,584)

(93)

(5,790)

(9,464)

(15,331)

(1,414)

(7,697)
(4,077)

(493)

624

(681)

(6,632)

(16,843)

(24,341)

(5,182)

(5,214)
(4,357)

(7,594)

(117)

(13,057)

(22,464)

(648)

(356)

36,747

39,910

1,251

2,490
(2,308)

(5,277)

831

(3,013)

$

9,908

$

12,182

$

(2,274) $

(1,877) $

42,923

$

(33)

(6,276)

(53,590)

(64,251)

(6,433)

(7,704)
(2,049)

(2,317)

(948)

(19,451)

(44,800)

(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 to provide 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.

The provision is a result of management's estimate of credit losses over the contractual life of the loan portfolio. The change in
the allowance for credit is impacted by estimated expected losses in the portfolio determined by a discounted cash flow analysis
considering inputs such as contractual payment schedules, prepayment estimates, historical loss experience, calculated
probability of default and loss given default estimates and forecasts for certain macroeconomic variables, such as
unemployment, gross domestic product and the housing price index as well as other macroeconomic variables.

The provision for credit losses for loans for 2021 totaled a $0.4 million negative provision, a decrease of $53.8 million, or
100.7%, compared to 2020. The level of provision expense for the year-ended December 31, 2021 is primarily a result of an
improved economic forecast, which reflects a decline in the impact of the COVID-19 pandemic on the economy and expected
loan losses. The provision for credit losses was also impacted by a decrease of $4.5 million in reserves on individually
analyzed loans. Contributing to the decline in provision for credit losses was a $4.2 million decrease in expense related to
lower reserves for off-balance sheet commitments.

Provision expense for the commercial, financial, agricultural and other category was impacted by net charge-offs of $4.6
million, offset by a decrease in outstanding balances, excluding PPP loans. Because PPP loans are fully guaranteed by the Small
Business Administration ("SBA"), there is no allowance for credit losses recognized for these loans. Provision expense for real
estate construction and residential real estate can be attributed to improved economic factors. Provision expense for the
commercial real estate category is a result of $1.5 million in net charge-offs offset by a $4.9 million decrease in general reserves
due to improved economic factors as well as a $3.5 million decrease in specific reserves. Net charge-offs related to loans to
individuals were $2.6 million for the year ended December 31, 2021, including $0.8 million for indirect auto loans and $1.5
million related to other consumer loans. The provision expense for loans to individuals was also impacted by growth in the
portfolio of $184.2 million.

34

The table below provides a breakout of the provision for credit losses by loan category for the years ended December 31:

2021

2020

Dollars

Percentage

Dollars

Percentage

Commercial, financial, agricultural and other

$

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first liens

Residential junior liens/home equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Provision for credit losses on loans

Provision for off-balance sheet credit exposure

Total provision for credit losses

$

$

5,496

5,441

55

(3,892)

(1,892)

(737)

(1,155)

(7,053)

(2,678)

(2,145)

(2,230)

6,964
6,035

215

714

(377)

(999)

(1,376)

(dollars in thousands)

(1,458)% $

(1,443)

(15)

1,032

502

196

306

1,871

710

569

592

(1,847)
(1,601)

(57)

(189)

100 % $

$

1,479

1,515

(36)

4,820

3,615

847

2,768

27,019

4,593

20,588

1,838

16,539
13,236

973

2,330

53,472

3,246

56,718

3 %

3

—

9

7

2

5

50

9

38

3

31
25

2

4

100 %

The level of provision expense for the year-ended December 31, 2020 totaled $53.5 million and primarily was a result of $17.2
million in net charge-offs and an increase in the allowance for credit losses resulting from the implementation of CECL. The
expected loss methodology uses an economic forecast which at December 31, 2020 incorporated uncertainty and risks related to
the COVID-19 pandemic.

The allowance for credit losses was $92.5 million, or 1.35%, of total loans outstanding at December 31, 2021, compared to
$101.3 million, or 1.50%, at December 31, 2020. Nonperforming loans as a percentage of total loans increased slightly to
0.81% at December 31, 2021 from 0.80% at December 31, 2020. The allowance to nonperforming loan ratio was 167.7% as of
December 31, 2021 and 187.4% at December 31, 2020. Net charge-offs were $8.4 million for the year-ended December 31,
2021 compared to $17.2 million for the same period in 2020.

Upon adoption of CECL at January 1, 2020, the provision for credit losses on off-balance sheet credit exposures are recorded as
part of the provision for credit losses instead of a component of non-interest expense as it previously was recorded. The
provision for credit losses recorded for off-balance sheet credit exposures totaled a negative provision of $1.0 million for the
year ended December 31, 2021 and provision expense of $3.2 million for the year ended December 31, 2020.

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

35

A detailed analysis of our credit loss experience for the previous five years is shown below:

Loans outstanding at end of year

$ 6,839,230

$ 6,761,183

$ 6,189,148

$ 5,774,139

$ 5,407,376

2021

2020

2019

2018

2017

(dollars in thousands)

$ 6,777,192

$ 6,737,339

$ 5,987,398

$ 5,582,651

$ 5,278,511

Average loans outstanding

Balance, beginning of year

Adoption of accounting standard - ASU 2016-13

Loans charged off:

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans charged off

Recoveries of loans previously charged off:

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total recoveries

Net charge-offs

Provision charged to expense

Balance, end of year

Ratios:

$

101,309

$

—

7,020

9

309

1,659

4,061

13,058

2,430

155

468

135

1,460

4,648

8,410

(377)

51,637

13,393

6,318

—

1,040

4,939

6,953

$

47,764

$

48,298

$

50,185

—

3,393

—

1,042

2,008

5,831

—

5,294

—

1,313

3,930

4,576

—

6,634

—

1,287

340

4,248

19,250

12,274

15,113

12,509

314

26

414

312

991

2,057

17,193

53,472

326

158

315

189

626

1,614

10,660

14,533

51,637

$

788

141

361

153

605

2,048

13,065

12,531

47,764

3,901

470

371

278

515

5,535

6,974

5,087

$

48,298

$

92,522

$

101,309

$

Net charge-offs as a percentage of average loans
outstanding

Allowance for credit losses as a percentage of
end-of-period loans outstanding

Allowance for credit losses as a percentage of
end-of-period loans outstanding, excluding PPP
loans

0.12 %

0.26 %

0.18 %

0.23 %

0.13 %

1.35 %

1.50 %

0.83 %

0.83 %

0.89 %

1.37 %

1.61 %

0.83 %

0.83 %

0.89 %

36

Noninterest Income

The components of noninterest income for each year in the three-year period ended December 31 are as follows:

2021

2020

2019

$ Change

% Change

2021 compared to 2020

(dollars in thousands)

Noninterest Income:
Trust income

$

11,111

$

9,101

$

8,321

$

Service charges on deposit accounts

17,984

16,387

18,926

Insurance and retail brokerage
commissions
Income from bank owned life
insurance
Card related interchange income

Swap fee income

Other income

Subtotal

Net securities gains

Gain on sale of mortgage loans

Gain on sale of other loans and assets

Derivative mark to market

8,502

7,850

7,583

6,433

27,954

2,543

8,185

82,712

16

13,555

8,130

2,344

6,552

23,966

1,588

7,892

73,336

70

18,764

4,827

(2,521)

6,002

21,677

3,397

7,268

73,174

22

7,765

4,793

(269)

2,010

1,597

652

(119)

3,988

955

293

9,376

(54)

(5,209)

3,303

4,865

22 %

10

8

(2)

17

60

4

13

(77)

(28)

68

(193)

Total noninterest income

$

106,757

$

94,476

$

85,485

$

12,281

13 %

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, increased $9.4 million, or 13%, in 2021. Card related interchange income increased $4.0 million
due to growth in customer accounts and transactions and trust income increased $2.0 million due to growth in assets under
management. Service charges on deposit accounts increased $1.6 million as customer activity began to return to pre-COVID
levels and swap fee income increased $1.0 million due to an increase in interest rate swaps entered into for our commercial
customers.

Total noninterest income increased $12.3 million, or 13%, in comparison to the year ended December 31, 2020. The most
significant change, other than the changes noted above, includes a $4.9 million increase in the mark to market adjustment on
interest rate swaps entered into for our commercial customers. This adjustment does not reflect a realized gain on the swaps, but
rather relates to a change in fair value due to movements in corporate bond spreads and swap rates as well as changes in
counterparty credit risk. Gain on sale of other loans and assets increased $3.3 million due to an increase in the sale of other
loans, primarily SBA loans, in comparison to the prior year. Partially offsetting these increases is a decrease of $5.2 million in
gain on sale of mortgage loans due to a decline in volume and spread received on mortgage loans sold.

If the Company's total assets would equal or exceed $10 billion we would no longer qualify for exemption from the interchange
fee cap included in the Dodd-Frank Act. We estimate the application of the interchange fee cap would have decreased
interchange income by approximately $13.8 million in 2021.

37

Noninterest Expense

The components of noninterest expense for each year in the three-year period ended December 31 are as follows:

2021

2020

2019

$ Change

% Change

2021 compared to 2020

(dollars in thousands)

Noninterest Expense:

Salaries and employee benefits

$

119,506

$

118,961

$

112,237

$

Net occupancy

Furniture and equipment

Data processing

Advertising and promotion

Pennsylvania shares tax

Intangible amortization

Other professional fees and services

FDIC insurance

Other operating expenses

Subtotal

Loss on sale or write-down of assets

Litigation and operational losses

Merger and acquisition related

COVID-19 expense

Early retirement

Branch consolidation

16,586

15,642

12,373

4,983

4,604

3,497

4,501

2,529

26,663

210,884
303

2,324

—

449

—

(103)

17,647

15,393

10,543

4,679

4,500

3,689

3,886

2,699

24,770

206,767
680

1,411

—

874

3,422

2,672

18,923

15,160

10,692

4,250

4,602

3,344

4,631

1,219

27,960

203,018
1,724

1,687

3,536

—

—

—

Total noninterest expense

$

213,857

$

215,826

$

209,965

$

545

(1,061)

249

1,830

304

104

(192)

615

(170)

1,893

4,117
(377)

913

—

(425)

(3,422)

(2,775)

(1,969)

— %

(6)

2

17

6

2

(5)

16

(6)

8

2
(55)

65

—

(49)

(100)

(104)

(1)%

Total noninterest expense decreased $2.0 million, or 1%, compared to the year ended December 31, 2020. Contributing to the
decline in expense is the recognition in 2020 of $3.4 million in voluntary early retirement expense and $2.7 million in branch
consolidation expense. There was no similar activity during the year ended December 31, 2021. Also contributing to the
decrease in noninterest expense is a $1.1 million decline in net occupancy expense resulting from savings related to the branch
consolidation efforts in 2020 more than offsetting increases in this expense.

Offsetting these decreases is an increase of $1.9 million in other operating expenses resulting from a $1.2 million credit in
unfunded commitment expense recognized in 2020, with no similar credit in 2021. As a result of the adoption of CECL, the
unfunded commitment expense is now recorded as part of provision for credit losses. Data processing expense increased $1.8
million due to updates to our digital banking product offerings.

Income Tax

The provision for income taxes of $34.6 million in 2021 reflects an increase of $17.8 million compared to the provision for
income taxes in 2020, as a result of a $82.6 million increase in the level of income before taxes.

The effective tax rate was 20.0% and 18.6% for tax expense in 2021 and 2020, respectively. We ordinarily generate an annual
effective tax rate that is less than the statutory rate 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.

Financial Condition

First Commonwealth’s total assets increased $477.0 million as of December 31, 2021 compared to December 31, 2020. Loans,
including loans held for sale, increased $63.2 million, or 1%, and investment securities increased $389.6 million, or 33%. Loan
growth in 2021 was impacted by a decrease of $407.6 million in PPP loans as a result of SBA forgiveness and payments. As of
December 31, 2021 outstanding PPP loans totaled $71.3 million compared to $478.9 million at December 31, 2020. The
increase in investment securities can be attributed to the liquidity provided from the decline in PPP loans as well as increases in
noninterest-bearing deposits of $338.8 million, or 15%, and interest-bearing deposits of $205.0 million, or 4%.

38

During 2021, approximately $554.6 million in investment securities were sold, called or matured. Most of these securities were
higher yielding securities in comparison to the total portfolio yield and, as such, their replacement contributed to the decrease in
the yield earned on the portfolio. In total, $21.6 million in agency securities, $994.4 million in mortgage-backed securities,
$3.2 million in municipal securities, $19.2 million in corporate securities and $0.2 million in other securities were purchased in
2021 in order to invest excess liquidity and help replace runoff from the portfolio while maintaining a reduced risk profile.

First Commonwealth’s total liabilities increased $436.2 million, or 5%, in 2021. Deposits increased $543.8 million, or 7%. The
increase in deposits is a result of elevated customer balances from PPP loan proceeds and the deposit of Federal Stimulus
checks. Short-term borrowings decreased $20.9 million, or 18%, largely due to maturities and additional liquidity provided
from the increase in deposits.

Total shareholders' equity increased $40.8 million in 2021. Growth in shareholders' equity was the result of net income of
$138.3 million partially offset by a $26.0 million decrease in accumulated other comprehensive income, $43.6 million in
dividends declared and $31.3 million in stock repurchases.

Loan Portfolio

Following is a summary of our loan portfolio as of December 31:

2021

2020

2019

2018

2017

Amount

%

Amount

%

Amount

%

Amount

%

Amount

%

(dollars in thousands)

Commercial, financial,
agricultural and other
Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

$ 1,173,452

17 % $ 1,555,986

23 % $ 1,241,853

20 % $ 1,138,473

20 % $ 1,163,383

22 %

494,456

1,920,250

2,251,097

999,975

7

28

33

15

427,221

1,750,592

2,211,569

815,815

6

26

33

12

449,039

1,681,362

2,117,519

699,375

7

27

34

12

358,978

1,562,405

2,123,544

590,739

6

27

37

10

248,868

1,426,370

2,019,096

549,659

5

26

37

10

Total loans

$ 6,839,230

100 % $ 6,761,183

100 % $ 6,189,148

100 % $ 5,774,139

100 % $ 5,407,376

100 %

The loan portfolio totaled $6.8 billion as of December 31, 2021, reflecting growth of $78.0 million, or 1%, compared to
December 31, 2020. All categories experienced loan growth, except for commercial, financial, agricultural and other.

Commercial, financial, agricultural and other loans decreased $382.5 million, or 25%, as a result of a $407.6 million decline in
PPP loans due to SBA forgiveness and payments. These loans carry a fixed rate of 1.00% and yielded 7.4% in 2021 after
considering origination fees and costs recognized over the life of the loan or accelerated recognition at payoff or forgiveness.

Residential real estate loans increased $169.7 million, or 10%, primarily due to originations of first lien closed-end 1-4 family
mortgage loans. Growth in the loans to individuals category of $184.2 million, or 23%, was the result of growth in indirect auto
loans.

The majority of our loan portfolio is with borrowers located in the state of Pennsylvania. The Company also has a portion of its
loan portfolio in Ohio as a result of four recent acquisitions in that state. As of December 31, 2021 and 2020, there were no
concentrations of loans relating to any industry in excess of 10% of total loans.

39

Final loan maturities and rate sensitivities of the loan portfolio excluding consumer installment and mortgage loans at
December 31, 2021 were as follows:

Commercial, financial, agricultural and other

Real estate construction (a)

Commercial real estate

Other

Totals

Loans at fixed interest rates

Loans at variable interest rates

Totals

Within
One Year

One to
5 Years

After
5 Years

Total

(dollars in thousands)

$

$

172,585

$

611,872

$

388,337

$

1,172,794

139,911

294,475

5,380

165,755

861,406

20,042

77,477

1,096,619

120,672

383,143

2,252,500

146,094

612,351

$

1,659,075

$

1,683,105

$

3,954,531

318,758

1,340,317

253,313

1,429,792

$

1,659,075

$

1,683,105

(a) The maturities of real estate construction loans include term commitments that follow the construction period. Loans

with these term commitments will be moved to the commercial real estate category when the construction phase of the
project is completed.

First Commonwealth has a legal lending limit of $156.3 million to any one borrower or closely related group of borrowers, but
has established lower thresholds for credit risk management.

Nonperforming Loans

Nonperforming loans include nonaccrual loans and restructured loans. Nonaccrual loans represent loans on which interest
accruals have been discontinued. 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 under terms not available in
the market.

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. Consumer loans are placed in nonaccrual
status at 150 days past due. Other types of loans are typically placed in nonaccrual status when there is evidence of a
significantly weakened financial condition or principal and interest is 90 days or more delinquent. Interest received on a
nonaccrual loan is normally applied as a reduction to loan principal rather than interest income utilizing the cost recovery
methodology of revenue recognition.

Nonperforming loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The estimated
credit loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral and the
present value of projected future cash flows. Losses are recognized when a loss is expected and the amount is reasonably
estimable.

40

The following is a comparison of nonperforming assets and the effects on interest due to nonaccrual loans for the period ended
December 31:

2021

2020

2019

2018

2017

(dollars in thousands)

Nonperforming Loans:

Loans on nonaccrual basis

$

34,926

$

30,801

$

18,638

$

11,509

$

19,455

Loans held for sale on nonaccrual basis

Troubled debt restructured loans on
nonaccrual basis
Troubled debt restructured loans on
accrual basis

Total nonperforming loans

Loans past due in excess of 90 days and
still accruing
Other real estate owned

$

$

$

—

13,134

7,120

55,180

1,606

642

13

14,740

8,512

54,066

1,523

1,215

$

$

$

—

6,037

7,542

32,217

2,073

2,228

—

11,761

8,757

32,027

1,582

3,935

—

11,222

11,563

42,240

1,854

2,765

$

$

$

$

$

$

$

$

$

Loans outstanding at end of period

$ 6,839,230

$ 6,761,183

$ 6,189,148

$ 5,774,139

$ 5,407,376

Average loans outstanding

$ 6,777,192

$ 6,737,339

$ 5,987,398

$ 5,582,651

$ 5,278,511

Nonperforming loans as a percentage of
total loans
Provision for credit losses on loans

Allowance for credit losses

Net charge-offs

Net charge-offs as a percentage of
average loans outstanding
Provision for credit losses on loans as a
percentage of net charge-offs
Allowance for credit losses as a
percentage of end-of-period loans
outstanding (a)

Allowance for credit losses as a
percentage of end-of-period loans
outstanding, excluding PPP loans (a)

Allowance for credit losses as a
percentage of nonperforming loans (a)
Gross income that would have been
recorded at original rates
Interest that was reflected in income

Net reduction to interest income due to
nonaccrual

$

$

$

$

$

0.81 %

(377)

92,522

8,410

0.80 %

0.52 %

0.55 %

0.78 %

$

$

$

53,472

101,309

17,193

$

$

$

14,533

51,637

10,660

$

$

$

12,531

47,764

13,065

$

$

$

5,087

48,298

6,974

0.12 %

0.26 %

0.18 %

0.23 %

0.13 %

(4.48)%

311.01 %

136.33 %

95.91 %

72.94 %

1.35 %

1.50 %

0.83 %

0.83 %

0.89 %

1.37 %

1.61 %

0.83 %

0.83 %

0.89 %

167.67 %

187.43 %

160.28 %

149.14 %

114.34 %

3,503

569

2,934

$

$

3,733

297

3,436

$

$

1,860

262

1,598

$

$

1,428

256

1,172

$

$

2,079

783

1,296

(a) End of period loans and nonperforming loans exclude loans held for sale.

Nonperforming loans increased $1.1 million to $55.2 million at December 31, 2021, compared to $54.1 million at December
31, 2020. Nonperforming loans as a percentage of total loans increased to 0.81% from 0.80% at December 31, 2021 compared
to December 31, 2020.

Also included in nonperforming loans are TDRs, which 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 under terms not
available in the market. TDRs decreased $3.0 million during 2021. For additional information on TDRs please refer to Note 8
“Loans and Allowance for Credit Losses.”

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 national
emergency. These modifications typically provide for the deferral of both principal and interest for 90 days. The CARES Act,
along with a joint agency statement issued by banking regulators, provides that modifications meeting certain criteria made in
response to COVID-19 do not need to be accounted for as a TDR. As of December 31, 2020 the Company has granted

41

approximately 6,800 deferrals to its customers with aggregate principal balances of $1.4 billion. As of December 31, 2021, the
balance of loans in deferral status had fallen to $6.2 million.

Net charge-offs were $8.4 million in 2021 compared to $17.2 million for the year 2020. The most significant credit losses
recognized during the year include $5.3 million in charge-offs recognized on two commercial, financial, agricultural and other
relationships and a $1.4 million charge-off recognized on a commercial real estate relationship. Net charge-offs in the loans to
individuals category totaled $2.6 million for 2021, primarily due to charge-offs of indirect auto loans. Additional detail on
credit risk is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under
“Provision for Credit Losses,” “Allowance for Credit Losses" and "Credit Risk.”

Provision for credit losses on loans as a percentage of net charge-offs decreased to a negative 4.5% for the year ended
December 31, 2021 from 311.0% for the year ended December 31, 2020. This change is primarily due to the implementation of
CECL and the uncertainty and risks of the COVID-19 pandemic on the economy and the economic forecast in the year ended
December 31, 2020.

Allowance for Credit Losses

Following is a summary of the allocation of the allowance for credit losses at December 31:

2021

2020

2019

2018

2017

Allowance
Amount

%
(a)

Allowance
Amount

%
(a)

Allowance
Amount

%
(a)

Allowance
Amount

%
(a)

Allowance
Amount

%
(a)

(dollars in thousands)

$ 18,093

17 % $ 17,187

23 % $ 20,234

20 % $ 19,374

20 % $ 23,429

22 %

4,220

12,625

33,376

24,208

7

28

33

15

7,966

14,358

41,953

19,845

6

26

33

12

2,558

4,093

19,768

4,984

7

27

34

12

2,002

3,969

18,386

4,033

6

27

37

10

1,349

2,759

17,357

3,404

5

26

37

10

$ 92,522

$ 101,309

$ 51,637

$ 47,764

$ 48,298

1.35 %

1.50 %

0.83 %

0.83 %

0.89 %

1.37 %

1.61 %

0.83 %

0.83 %

0.89 %

Commercial, financial,
agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total

Allowance for credit losses as
percentage of end-of-period
loans outstanding

Allowance for credit losses as
a percentage of end-of-period
loans outstanding, excluding
PPP loans

(a) Represents the ratio of loans in each category to total loans.

On March 27, 2020, the CARES Act was signed into law, providing banking organizations with optional, temporary relief
from complying with CECL. The Company elected to defer its adoption of CECL until the fourth quarter 2020. At the end of
the deferral period, CECL was adopted effective January 1, 2020, therefore December 31, 2020 results reflect a full years
impact of accounting for the allowance for credit losses under CECL.

The allowance for credit losses decreased $8.8 million from December 31, 2020 to December 31, 2021. The allowance for
credit losses as a percentage of end-of-period loans outstanding was 1.35% at December 31, 2021. The decrease compared to
December 31, 2020 is primarily due to improved economic forecasts, reflecting a decline in the expected impact of COVID-19
pandemic on the economy during 2021. The increased level of the allowance for credit losses at December 31, 2021 and 2020,
compared to prior years is a result of calculating the allowance in those years in accordance with CECL, which provides for
expected losses over the life of a loan. Prior years allowance for credit losses was calculated to provide for credit losses as they
were incurred. The allowance for credit losses includes both a general reserve for performing loans and reserves for
individually analyzed loans. Comparing December 31, 2021 to December 31, 2020, the general reserve for performing loans is
1.36% and 1.43%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans decreased
from 9.1% of nonperforming loans at December 31, 2020 to 0.7% of nonperforming loans at December 31, 2021. The
allowance for credit losses as a percentage of nonperforming loans was 167.7% and 187.4% at December 31, 2021 and 2020,
respectively.

The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in
time. This estimate includes losses associated with specifically identified loans, as well as estimated credit losses inherent in the
remainder of the loan portfolio. Additions are made to the allowance through both periodic provisions charged to income and
recoveries of losses previously incurred. Reductions to the allowance occur as loans are charged off. Management evaluates the

42

appropriateness of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to,
assessment of historical loss experience, contractual payment schedules, prepayment estimates, calculated probability of default
and loss given default estimates and forecasts of certain macroeconomic variables, such as unemployment, gross domestic
product, housing price index as well as other macroeconomic variables. This evaluation is subjective and requires material
estimates that may change over time. For a description of the methodology used to calculate the allowance for credit losses,
please refer to “Critical Accounting Policies and Significant Accounting Estimates—Allowance for Credit Losses for Loans.”

Investment Portfolio

Marketable securities that we hold in our investment portfolio, which are classified as “securities available for sale,” act as a
source of liquidity. However, we do not anticipate liquidating the investments prior to maturity.

Following is a detail schedule of the amortized cost of securities available for sale as of December 31:

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential
Other Government-Sponsored Enterprises

Obligations of States and Political Subdivisions

Corporate Securities

2021

2020

2019

(dollars in thousands)

$

5,242

$

6,492

$

365,024

182,823

632,687

1,000

9,538

32,088

481,109

100,996

11,154

22,941

7,745

186,316

660,777

1,000

17,738

22,919

Total Securities Available for Sale

$

1,045,579

$

805,515

$

896,495

As of December 31, 2021, securities available for sale had a fair value of $1.0 billion. Gross unrealized gains were $9.5 million
and gross unrealized losses were $13.7 million.

The following is a schedule of the contractual maturity distribution of securities available for sale at December 31, 2021.

Within 1 year

After 1 but within 5 years

After 5 but within 10 years

After 10 years

Total

U.S.
Government
Agencies and
Corporations

States and
Political
Subdivisions

Other
Securities

Total
Amortized
Cost (a)

Weighted
Average
Yield (b)

$

29

$

— $

— $

(dollars in thousands)

15,432

79,592

908,900

1,883

7,655

—

10,991

21,097

—

29

28,306

108,344

908,900

5.72 %

2.99

2.05

1.71

$

1,003,953

$

9,538

$

32,088

$

1,045,579

1.78 %

(a) Equities are excluded from this schedule because they have an indefinite maturity.
(b) Yields are calculated on a taxable equivalent basis.

Mortgage-backed securities, which include mortgage-backed obligations of U.S. Government agencies and obligations of U.S.
Government-sponsored enterprises, have contractual maturities ranging from less than one year to approximately 45 years and
have anticipated average lives to maturity ranging from less than three years to approximately five years.

The available for sale investment portfolio amortized cost increased $240.1 million, or 30%, at December 31, 2021 compared to
2020. Available for sale investment purchases of $676.9 million were offset by the sale, call or maturity of $433.9 million in
investments. Liquidity provided from sales, calls and maturities was utilized to fund growth in the loan portfolio or reinvested
into investment securities and interest bearing deposits with banks.

43

Following is a detail schedule of the amortized cost of securities held to maturity as of December 31:

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Other Government-Sponsored Enterprises

Obligations of States and Political Subdivisions

Debt Securities Issued by Foreign Governments

Total Securities Held to Maturity

2021

2020

2019

(dollars in thousands)

$

2,409

$

2,766

$

91,439

36,799

387,848

277,351

7,309

21,904

29,402

1,000

9,737

—

34,391

800

3,392

51,291

229,667

12,081

—

40,092

600

$

541,311

$

361,844

$

337,123

The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2021.

Within 1 year

After 1 but within 5 years

After 5 but within 10 years

After 10 years

Total

U.S.
Government
Agencies and
Corporations

States and
Political
Subdivisions

Other
Securities

Total
Amortized
Cost

Weighted
Average
Yield

(dollars in thousands)

— $

708

$

7,309

29,173

474,427

6,809

21,323

562

$

200

800

—

—

510,909

$

29,402

$

1,000

$

$

$

908

14,918

50,496

474,989

541,311

2.80 %

2.62

1.85

1.46

1.53 %

The held to maturity investment portfolio increased $179.5 million, or 50%, at December 31, 2021 compared to 2020. Held to
maturity investment purchases of $361.7 million were offset by the sale, call or maturity of $120.7 million in investments.

See Note 7 “Investment Securities" and Note 16 “Fair Values of Assets and Liabilities” for additional information related to the
investment portfolio.

44

Deposits

Total deposits increased $543.8 million, or 7%, in 2021. Interest-bearing demand and savings deposits increased $382.9
million, noninterest-bearing demand deposits increased $338.8 million and time deposits decreased $177.9 million. The
increase in deposits can be attributed to elevated customer deposit balances from PPP loan proceeds and the deposit of Federal
stimulus checks. For additional information concerning our deposits, please refer to Note 12 “Interest-Bearing Deposits.”

Time deposits of $100 thousand or more had remaining maturities as follows as of the end of each year in the three-year period
ended December 31:

3 months or less

Over 3 months through 6 months

Over 6 months through 12 months

Over 12 months

Total

2021

2020

2019

Amount

%

Amount

%

Amount

%

$

40,690

29,018

38,629

27,749

(dollars in thousands)

30 % $

21

29

20

79,135

59,193

52,447

40,675

34 % $

26

23

17

51,625

88,352

133,893

103,759

14 %

23

35

28

$ 136,086

100 % $

231,450

100 % $ 377,629

100 %

Short-Term Borrowings and Long-Term Debt

Short-term borrowings increased $20.9 million, or 18%, from $117.4 million at December 31, 2020 to $138.3 million at
December 31, 2021. Long-term debt decreased $51.0 million, from $233.3 million at December 31, 2020 to $182.3 million at
December 31, 2021. For additional information concerning our short-term borrowings, subordinated debentures and other long-
term debt, please refer to Note 13 “Short-term Borrowings,” Note 14 “Subordinated Debentures” and Note 15 “Other Long-
term Debt” of the Consolidated Financial Statements.

Contractual Obligations and Off-Balance Sheet Arrangements

The table below sets forth our contractual obligations to make future payments as of December 31, 2021. For a more detailed
description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table
below.

Footnote
Number
Reference

1 Year
or Less

After 1
But Within
3 Years

After 3
But Within
5 Years

(dollars in thousands)

After 5
Years

Total

FHLB advances

Subordinated debentures

Operating leases

Total contractual obligations

15

14
10

$

$

712

$

1,508

$

1,629

$

1,724

$

5,573

—
4,667

—
9,103

—
8,105

170,775
35,207

170,775
57,082

5,379

$

10,611

$

9,734

$

207,706

$

233,430

The table above excludes our cash obligations upon maturity of certificates of deposit, which is set forth in Note 12 “Interest-
Bearing Deposits” of the Consolidated Financial Statements.

In addition, see Note 9 “Commitments and Letters of Credit” for detail related to our off-balance sheet commitments to extend
credit, financial standby letters of credit, performance standby letters of credit and commercial letters of credit as of December
31, 2021. Commitments to extend credit, standby letters of credit and commercial letters of credit do not necessarily represent
future cash requirements since it is unknown if the borrower will draw upon these commitments and often these commitments
expire without being drawn upon. As of December 31, 2021, a reserve for expected credit losses of $6.4 million was recorded
for unused commitments and letters of credit.

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. Liquidity risk arises from the possibility that we may not be able to meet our financial
obligations and operating cash needs or may become overly reliant upon external funding sources. In order to manage this risk,
our Board of Directors has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for

45

monitoring and measuring liquidity and quantifies minimum liquidity requirements based on limits approved by our Board of
Directors. This policy designates our Asset/Liability Committee (“ALCO”) as the body responsible for meeting these
objectives. The ALCO, which includes members of executive management, reviews liquidity on a periodic basis and approves
significant changes in strategies that affect balance sheet or cash flow positions. Liquidity is centrally managed on a daily basis
by our Treasury Department, which monitors it by using such measures as a 30-day liquidity stress analysis, liquidity gap ratios
and noncore funding ratios.

We generate funds to meet our cash flow needs primarily through the core deposit base of FCB and the maturity or repayment
of loans and other interest-earning assets, including investments. Core deposits are the most stable source of liquidity a bank
can have due to the long-term relationship with a deposit customer. The level of deposits during any period is sometimes
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. Deposits increased $543.8 million, or 7%,
during 2021, and comprised 95% of total liabilities at December 31, 2021, as compared to 93% at December 31, 2020. The
increase in deposits in 2021 is a result of elevated customer deposit balances from PPP loan proceeds and the deposit of Federal
stimulus checks into our customer's deposit accounts. Proceeds from the sale, maturity and redemption of investment securities
totaled $554.6 million during 2021 and provided liquidity to fund loans, pay down short-term borrowings, 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 Federal Home Loan Bank of Pittsburgh, borrowings through the discount window at the Federal Reserve
Bank of Cleveland and access to certificates of deposit through brokers. We have increased our borrowing capacity at the
Federal Reserve by establishing a Borrower-in-Custody of Collateral arrangement that enables us to pledge certain loans, not
being used as collateral at the Federal Home Loan Bank, as collateral for borrowings at the Federal Reserve. At December 31,
2021 our borrowing capacity at the Federal Reserve related to this program was $982.1 million and there were no amounts
outstanding. Additionally, as of December 31, 2021, our maximum borrowing capacity at the Federal Home Loan Bank of
Pittsburgh was $1.9 billion and as of that date amounts used against this capacity included $5.6 million in outstanding
borrowings.

We participate in the Certificate of Deposit Account Registry Services (“CDARS”) program as part of an ALCO strategy to
increase and diversify funding sources. As of December 31, 2021, our maximum borrowing capacity under this program was
$1.0 billion and as of that date there was $5.8 million outstanding. We also participate in a reciprocal program which allows our
depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks. As of
December 31, 2021, our outstanding certificates of deposits from this program have an average weighted rate of 0.57% and an
average original term of 341 days.

We also have available unused federal funds lines with four correspondent banks. These lines have an aggregate commitment
of $160.0 million and there were no amounts outstanding as of December 31, 2021. In addition, we have available unused repo
lines with three correspondent banks. These lines have an aggregate commitment of $875.2 million with no outstanding balance
as of December 31, 2021.

The liquidity needs of First Commonwealth on an unconsolidated basis (the "Parent Company") consist primarily of operating
expenses, debt service payments and dividend payments to our stockholders, which collectively totaled $51.5 million for the
year ended December 31, 2021, as well as any cash necessary to repurchase our shares, which totaled $31.3 million for the year
ended December 31, 2021. The primary source of liquidity for the Parent Company is dividends from subsidiaries. The Parent
Company had $72.2 million in junior subordinated debentures and cash and interest-bearing deposits of $11.6 million at
December 31, 2021. At the end of 2021, the Parent Company had a $20.0 million short-term, unsecured revolving line of credit
with another financial institution. As of December 31, 2021, there were no amounts outstanding under this line. The Parent
Company has the ability to enhance its liquidity position by raising capital or incurring debt.

Refer to “Financial Condition” above for additional information concerning our deposits, loan portfolio, investment securities
and borrowings.

Market Risk

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity
prices. Our market risk is composed primarily of interest rate risk. Interest rate risk is comprised of repricing risk, basis risk,
yield curve risk and options risk. Repricing risk arises from differences in the cash flow or repricing between asset and liability
portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always
change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a
given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options”

46

within asset and liability products as certain borrowers have the option to prepay their loans when rates fall, while certain
depositors can redeem or withdraw their deposits early when rates rise.

The process by which we manage our interest rate risk is called asset/liability management. The goals of our asset/liability
management are increasing net interest income without taking undue interest rate risk or material loss of net market value of our
equity, while maintaining adequate liquidity. Net interest income is increased by growing earning assets and increasing the
difference between the rate earned on earning assets and the rate paid on interest-bearing liabilities. Liquidity is measured by
the ability to meet both depositors’ and credit customers’ requirements.

We use an asset/liability model to measure our interest rate risk. Interest rate risk measures include earnings simulation and gap
analysis. Gap analysis is a static measure that does not incorporate assumptions regarding future events. Gap analysis, while a
helpful diagnostic tool, displays cash flows for only a single rate environment. Net interest income simulations explicitly
measure the exposure to earnings from changes in market rates of interest. Under simulation analysis, our current financial
position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate
scenarios. Our net interest income simulations assume a level balance sheet whereby new volume equals run-off. The ALCO
reviews earnings simulations over multiple years under various interest rate scenarios. Reviewing these various measures
provides us with a reasonably comprehensive view of our interest rate profile.

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 0.84 and 0.51 at December 31, 2021 and 2020, respectively. A ratio of less than one indicates a higher
level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is
largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within
one year.

Following is the gap analysis as of December 31:

2021

0-90 Days

91-180
Days

181-365
Days

Cumulative
0-365 Days

(dollars in thousands)

Over 1 Year
Through 5
Years

Over 5
Years

$ 2,910,172

$

394,048

$

606,468

$ 3,910,688

$ 2,296,873

$

555,022

98,969

310,629

3,319,770

97,269

4,938,673

210,682

82,267

—

476,315

72,453

—

200

154,316

—

760,784

106,243

—

400

335,552

310,629

4,556,869

275,965

4,938,673

211,282

725,576

516,766

—

—

3,022,449

107,795

—

53,197

1,071,788

1,232

—

51,577

5,246,624

72,653

106,643

5,425,920

160,992

52,809

$ (1,926,854)

$

403,662

$

654,141

$

(869,051)

$ 2,861,457

$ 1,018,979

0.63

20.19 %

6.56

4.23 %

7.13

6.85 %

0.84

9.10 %

18.77

29.98 %

20.30

10.68 %

Loans

Investments

Other interest-earning assets

Total interest-sensitive
assets (ISA)

Certificates of deposit

Other deposits

Borrowings

Total interest-sensitive
liabilities (ISL)

Gap

ISA/ISL

Gap/Total assets

47

2020

0-90 Days

91-180
Days

181-365
Days

Cumulative
0-365 Days

(dollars in thousands)

Over 1 Year
Through 5
Years

Over 5
Years

$

596,292

$

495,759

$

942,174

$ 2,034,225

$ 3,424,936

$ 1,270,694

109,706

256,572

962,570

163,340

4,555,744

189,645

82,052

—

577,811

120,458

—

50,105

158,357

—

1,100,531

135,285

—

209

350,115

256,572

2,640,912

419,083

4,555,744

239,959

495,013

150,976

—

—

3,919,949

141,577

—

1,673

1,421,670

2,153

—

104,166

4,908,729

170,563

135,494

5,214,786

143,250

106,319

$ (3,946,159)

$

407,248

$

965,037

$ (2,573,874)

$ 3,776,699

$ 1,315,351

0.20

43.52 %

3.39

4.49 %

8.12

10.64 %

0.51

28.38 %

27.36

41.65 %

13.37

14.51 %

Loans

Investments

Other interest-earning assets

Total interest-sensitive
assets (ISA)

Certificates of deposit

Other deposits

Borrowings

Total interest-sensitive
liabilities (ISL)

Gap

ISA/ISL

Gap/Total assets

Gap analysis has limitations due to the static nature of the model, which 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 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.

December 31, 2021 ($)

December 31, 2021 (%)

December 31, 2020 ($)

December 31, 2020 (%)

Net interest income change (12 months)

-200

-100

+100

+200

$

$

(dollars in thousands)

(9,008)

$

(4,976)

$

5,956

(3.25)%

(1.79)%

2.15 %

(4,911)

$

(2,621)

$

3,340

(1.79)%

(0.95)%

1.22 %

$

$

10,224

3.69 %

6,229

2.27 %

The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates
as compared to if rates remained unchanged, assuming there are no changes in balance sheet categories.

December 31, 2021 ($)

December 31, 2021 (%)

December 31, 2020 ($)

December 31, 2020 (%)

Net interest income change (12 months)

-200

-100

+100

+200

(dollars in thousands)

$

(26,120)

$

(17,640)

$

13,867

(9.42)%

(6.36)%

5.00 %

$

(13,807)

$

(9,175)

$

9,921

$

$

29,192

10.53 %

18,408

(5.03)%

(3.34)%

3.61 %

6.70 %

The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200
basis point scenario given the current interest rate environment. Results of the 100 and 200 basis point interest rate decline

48

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. For the years 2021 and 2020, the cost of our interest-bearing liabilities averaged 0.27% and 0.58%,
respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 3.43% and
3.72%, respectively.

During the third quarter of 2021, after considering the excess liquidity position of First Commonwealth and the banking
industry, management revised its interest rate assumptions related to its ability to lag deposit rate increases for the first two 25
basis point interest rate increases by the Federal Reserve. The results of this assumption change, which extended the repricing
of core deposits, are reflected in the December 31, 2021 results in the above sensitivity tables for gradual and immediate
interest rate changes.

The ALCO is responsible for the identification and management of interest rate risk exposure. As such, the ALCO continuously
evaluates strategies to manage our exposure to interest rate fluctuations.

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

Credit Risk

First Commonwealth maintains an allowance for credit losses at a level deemed sufficient for losses inherent in the loan
portfolio at the date of each statement of financial condition. Management reviews the appropriateness of the allowance on a
quarterly basis to ensure that the provision for credit losses has been charged against earnings in an amount necessary to
maintain the allowance at a level that is appropriate based on management’s assessment of estimated expected 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 $6.4 million at December 31, 2021 and is classified in “Other liabilities” on the
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 alternate financing sources. In 2021, 30 loans totaling $9.4 million
were identified as troubled debt restructurings. These loans were individually analyzed and no additional reserves were
required.

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 in nonaccrual status
when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the
borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans which are
placed on nonaccrual status at 150 days past due.

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

The allowance for credit losses was $92.5 million at December 31, 2021 or 1.35% of loans outstanding, compared to $101.3
million or 1.50% of loans outstanding at December 31, 2020. Credit measures as of December 31, 2021 compared to December
31, 2020 reflect a decrease in the level of criticized loans of $104.7 million from $302.8 million at December 31, 2020 to
$198.1 million at December 31, 2021. Commercial real estate loans accounted for $90.3 million of this decrease. Classified
assets increased $1.4 million from $76.2 million at December 31, 2020 to $77.6 million at December 31, 2021. Delinquency on
accruing loans decreased $1.6 million, or 14%, and the level of nonperforming loans increased $1.1 million for the same period.

The allowance for credit losses as a percentage of nonperforming loans was 167.7% at December 31, 2021 and 187.4% as of
December 31, 2020. The allowance for credit losses includes specific allocations of $0.4 million related to nonperforming
loans covering 1% of the total nonperforming balance at December 31, 2021 and specific allocations of $4.9 million covering

49

9% of the total nonperforming balance at December 31, 2020. The amount of allowance related to nonperforming loans was
determined by using estimated fair values obtained from current appraisals and updated discounted cash flow analyses.

Management believes that the allowance for credit losses is at a level that is sufficient to absorb expected losses in the loan
portfolio at December 31, 2021.

The following table provides information on net charge-offs and nonperforming loans by loan category:

For the Period Ended December 31, 2021

As of December 31, 2021

% of
Total Net
Charge-
offs

Net
Charge-offs
as a %
of Average
Loans

Net
Charge-offs

Nonperforming
Loans

% of Total
Nonperforming
Loans

Nonperforming
Loans as a % of
Total Loans

(dollars in thousands)

$

4,590

54.58 %

0.06 % $

(146)

(159)

1,524

2,601

(1.74)

(1.89)

18.12

30.93

—

—

0.02

0.04

4,047

45

9,365

41,277

446

7.34 %

0.06 %

0.08

16.97

74.80

0.81

—

0.14

0.60

0.01

$

8,410

100.00 %

0.12 % $

55,180

100.00 %

0.81 %

Commercial, financial,
agricultural and other
Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans, net of
unearned income

As the above table illustrates, commercial real estate and residential real estate loans were the most significant portions of the
nonperforming loans as of December 31, 2021. See discussions related to the provision for credit losses and loans for more
information.

New Accounting Pronouncements

In March 2020, FASB released Accounting Standards Update (“ASU”) 2020-04 - Reference Rate Reform (Topic 848), which
provides optional guidance to ease the accounting burden in accounting for, or recognizing the effects from, reference rate
reform on financial reporting. The new standard is a result of the potential discontinuance of the London Interbank Offered Rate
("LIBOR") as an available benchmark rate. The standard is elective and provides optional expedients and exceptions for
applying GAAP to contracts, hedging relationships, or other transactions that reference LIBOR, or another reference rate
expected to be discontinued. The amendments in the update are effective for all entities between March 12, 2020 and December
31, 2022. The Company has established a cross-functional working group to manage the Company’s transition from LIBOR.
Products that utilize LIBOR have been identified and have incorporated enhanced language to accommodate the transition to
alternative reference rates. The Company continues to evaluate the impact of adopting the new standard and at this time does
not expect it to have a material impact on its consolidated financial statements.

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

Information appearing in Item 7 of this report under the caption “Market Risk” is incorporated herein by reference in response
to this item.

50

ITEM 8.

Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

Assets

Cash and due from banks

Interest-bearing bank deposits

Securities available for sale, at fair value

Securities held to maturity, at amortized cost, (Fair value $536,651 at December 31, 2021 and $369,851
at December 31, 2020)

Other investments

Loans held for sale

Loans:

Portfolio loans

Allowance for credit losses

Net loans

Premises and equipment, net

Other real estate owned

Goodwill

Amortizing intangibles, net

Bank owned life insurance

Other assets

Total assets

Liabilities

Deposits (all domestic):

Noninterest-bearing

Interest-bearing

Total deposits

Short-term borrowings

Subordinated debentures

Other long-term debt

Capital lease obligation

Total long-term debt

Other liabilities

Total liabilities

Shareholders’ Equity

December 31,

2021

2020

(dollars in thousands, except
share data)

$

84,738

$

310,634

1,041,380

541,311

12,838

18,583

100,009

256,572

831,223

361,844

12,227

33,436

6,839,230

6,761,183

(92,522)

(101,309)

6,746,708

6,659,874

120,775

642

303,328

11,188

224,700

128,268

125,517

1,215

303,328

13,492

225,952

143,415

$

9,545,093

$

9,068,104

$

2,658,782

$

2,319,958

5,323,716

7,982,498

138,315

170,775

5,573

5,921

182,269

132,639

5,118,708

7,438,666

117,373

170,612

56,258

6,385

233,255

210,193

8,435,721

7,999,487

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 as of
December 31, 2021 and 2020; and 94,233,152 and 96,130,751 shares outstanding at December 31, 2021
and 2020, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive (loss) income, net

Treasury stock (19,681,750 and 17,784,151 shares at December 31, 2021 and 2020, respectively)

Total shareholders’ equity

Total liabilities and shareholders’ equity

113,915

496,121

691,260

(8,768)

113,915

494,683

596,614

17,233

(183,156)

(153,828)

1,109,372

1,068,617

$

9,545,093

$

9,068,104

The accompanying notes are an integral part of these Consolidated Financial Statements.

51

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

2021

Years Ended December 31,
2020
(dollars in thousands, except share data)

2019

Interest Income

Interest and fees on loans
Interest and dividends on investments:

Taxable interest
Interest exempt from federal income taxes
Dividends

Interest on bank deposits

Total interest income

Interest Expense

Interest on deposits
Interest on short-term borrowings
Interest on subordinated debentures
Interest on other long-term debt
Interest on capital lease obligation
Total interest expense

Net Interest Income

Provision for credit losses

Net Interest Income after Provision for Credit Losses
Noninterest Income

Net securities gains
Trust income
Service charges on deposit accounts
Insurance and retail brokerage commissions
Income from bank owned life insurance
Gain on sale of mortgage loans
Gain on sale of other loans and assets
Card related interchange income
Derivative mark to market
Swap fee income
Other income

Total noninterest income

Noninterest Expense

Salaries and employee benefits
Net occupancy
Furniture and equipment
Data processing
Advertising and promotion
Pennsylvania shares tax
Intangible amortization
Other professional fees and services
FDIC insurance
Loss on sale or write-down of assets
Litigation and operational losses
Merger and acquisition related
COVID-19 expense
Early retirement
Branch consolidation
Other operating expenses

Total noninterest expense

Income before income taxes

Income tax provision

Net Income
Average Shares Outstanding
Average Shares Outstanding Assuming Dilution
Per Share Data: Basic Earnings Per Share

Diluted Earnings Per Share

Cash Dividends Declared per Common Share

$

267,599

$

275,189

$

291,889

24,723
595
521
400
293,838

5,749
99
8,555
649
245
15,297
278,541
(1,376)
279,917

16
11,111
17,984
8,502
6,433
13,555
8,130
27,954
2,344
2,543
8,185
106,757

24,063
1,053
686
218
301,209

21,972
704
8,580
1,419
263
32,938
268,271
56,718
211,553

70
9,101
16,387
7,850
6,552
18,764
4,827
23,966
(2,521)
1,588
7,892
94,476

119,506
16,586
15,642
12,373
4,983
4,604
3,497
4,501
2,529
303
2,324
—
449
—
(103)
26,663
213,857
172,817
34,560
138,257
95,583,890
95,840,285
1.45
1.44
0.455

$

$
$
$

118,961
17,647
15,393
10,543
4,679
4,500
3,689
3,886
2,699
680
1,411
—
874
3,422
2,672
24,770
215,826
90,203
16,756
73,447
97,499,586
97,758,965
0.75
0.75
0.440

$

$
$
$

$

$
$
$

29,773
1,591
1,608
403
325,264

36,725
8,298
9,084
1,016
279
55,402
269,862
14,533
255,329

22
8,321
18,926
7,583
6,002
7,765
4,793
21,677
(269)
3,397
7,268
85,485

112,237
18,923
15,160
10,692
4,250
4,602
3,344
4,631
1,219
1,724
1,687
3,536
—
—
—
27,960
209,965
130,849
25,516
105,333
98,317,787
98,588,164
1.07
1.07
0.400

The accompanying notes are an integral part of these Consolidated Financial Statements.

52

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net Income

Other comprehensive (loss) income, before tax (benefit) expense:

Unrealized holding (losses) gains on securities arising during the

i d

Less: reclassification adjustment for gains on securities included in net
income
Unrealized (losses) gains on derivatives:

Unrealized holding (losses) gains on derivatives arising during the
period

Unrealized gains (losses) for postretirement obligation:

Prior service cost

Net gain (loss)

Total other comprehensive (loss) income, before income tax
(benefit) expense

Income tax (benefit) expense related to items of other comprehensive (loss)
income

Comprehensive Income

Years Ended December 31,

2021

2020

2019

(dollars in thousands)

$

138,257

$

73,447

$

105,333

(29,892)

19,981

20,625

(16)

(70)

(22)

(3,356)

(4,467)

76

275

(537)

(155)

935

—

(121)

(32,913)

14,752

21,417

(6,912)

3,098

4,497

$

112,256

$

85,101

$

122,253

The accompanying notes are an integral part of these Consolidated Financial Statements.

53

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Shares
Outstanding

Common
Stock

Additional
Paid-in-
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss),
net

Treasury
Stock

Total
Shareholders’
Equity

(dollars in thousands, except per share data)

Balance at December 31, 2020

96,130,751

$

113,915

$

494,683

$

596,614

$

17,233

$

(153,828) $

1,068,617

Net income

Total other comprehensive loss

Cash dividends declared ($0.455 per share)

Treasury stock acquired

Treasury stock reissued

Restricted stock

138,257

(43,611)

(26,001)

(2,195,110)

173,907

123,604

—

771

667

—

—

138,257

(26,001)

(43,611)

(31,301)

2,264

1,147

(31,301)

1,493

480

Balance at December 31, 2021

94,233,152

$

113,915

$

496,121

$

691,260

$

(8,768) $

(183,156) $

1,109,372

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 per share data)

Balance at December 31, 2019

98,311,840

$

113,915

$

493,737

$

577,348

$

5,579

$

(134,914) $

1,055,665

Net income

Total other comprehensive income

Cash dividends declared ($0.440 per share)

Adoption of accounting standard - ASU
2016-13

Treasury stock acquired

Treasury stock reissued

Restricted stock

(2,430,842)

158,453

91,300

—

459

487

73,447

(42,982)

(11,199)

—

—

11,654

73,447

11,654

(42,982)

(11,199)

(20,905)

1,817

1,120

(20,905)

1,358

633

Balance at December 31, 2020

96,130,751

$

113,915

$

494,683

$

596,614

$

17,233

$

(153,828) $

1,068,617

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 per share data)

Balance at December 31, 2018

98,518,668

$

113,915

$

492,273

$

511,409

$

(11,341) $ (130,867) $

Net income

Total other comprehensive income

Cash dividends declared ($0.400 per share)

Treasury stock acquired

Treasury stock reissued

Restricted stock

105,333

(39,394)

16,920

(486,849)

205,021

75,000

—

1,014

450

—

—

(6,259)

1,730

482

975,389

105,333

16,920

(39,394)

(6,259)

2,744

932

Balance at December 31, 2019

98,311,840

$

113,915

$

493,737

$

577,348

$

5,579

$ (134,914) $

1,055,665

The accompanying notes are an integral part of these Consolidated Financial Statements.

54

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating Activities

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses

Deferred tax expense (benefit)

Depreciation and amortization

Net gains on securities and other assets

Net amortization of premiums and discounts on securities

Income from increase in cash surrender value of bank owned life insurance

Mortgage loans originated for sale

Proceeds from sale of mortgage loans

Decrease (increase) in interest receivable

Decrease in interest payable

Increase (decrease) in income taxes payable

Other—net

Net cash provided by operating activities

Investing Activities

Transactions with securities held to maturity:

Proceeds from sales

Proceeds from maturities and redemptions

Purchases

Transactions with securities available for sale:

Proceeds from sales

Proceeds from maturities and redemptions

Purchases

Purchases of FHLB stock

Proceeds from the redemption of FHLB stock

Proceeds from redemptiom of other investments

Proceeds from bank owned life insurance

Proceeds from the sale of loans

Proceeds from sales of other assets

Acquisition, net of cash acquired

Net increase in loans

Purchases of premises and equipment

Net cash (used in) provided by investing activities

Financing Activities

Net decrease in federal funds purchased
Net increase (decrease) in other short-term borrowings

Net increase in deposits

Repayments of other long-term debt

Proceeds from issuance of long-term debt

Repayments of capital lease obligations

Dividends paid

Proceeds from reissuance of treasury stock

Purchase of treasury stock

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at January 1

Cash and cash equivalents at December 31

Years Ended December 31,

2021

2020

2019

(dollars in thousands)

$

138,257

$

73,447

$

105,333

(1,376)

1,432

11,442

(22,273)

4,772

(6,105)

(390,940)

419,574

5,885

(412)

10,664

(5,874)

165,046

—

120,728

(361,734)

—

433,910

(676,861)

(4,453)

3,342

500

7,357

76,414

7,798

—

(161,667)

(10,639)

(565,305)

—

20,942

543,947

(50,685)

—

(464)

(43,611)

222

(31,301)

439,050

38,791
356,581

56,718

(8,217)

11,653

(18,807)

6,183

(6,288)

(410,715)

408,877

(10,735)

(879)

(887)

5,349

105,699

—

118,905

(85,679)

—

472,282

(411,178)

(22,231)

26,766

—

1,444

41,141

5,531

—

(622,504)

(7,615)

(483,138)

—

(84,480)

761,398

(659)

—

(430)

(42,982)

222

(20,905)

612,164

234,725
121,856

$

395,372

$

356,581

$

14,533

2,292

10,370

(10,671)

3,892

(5,998)

(251,428)

251,968

423

(256)

1,484

(14,310)

107,632

948

54,632

(200)

—

189,194

(138,670)

(36,850)

52,215

—

557

37,534

6,822

332,468

(358,328)

(17,380)

122,942

(11,000)

(508,970)

308,783

(634)

50,000

(402)

(39,394)

211

(6,259)

(207,665)

22,909
98,947

121,856

The accompanying notes are an integral part of these Consolidated Financial Statements.

55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Statement of Accounting Policies

General

The following summary of accounting and reporting policies is presented to aid the reader in obtaining a better understanding
of the consolidated financial statements of First Commonwealth Financial Corporation and its subsidiaries (“First
Commonwealth”) contained in this report. First Commonwealth's subsidiaries include, First Commonwealth Bank ("FCB" or
the "Bank"), First Commonwealth Insurance Agency, Inc. ("FCIA"), FRAMAL and First Commonwealth Financial Advisors,
Inc. ("FCFA").

The financial information is presented in accordance with generally accepted accounting principles and general practice for
financial institutions in the United States of America. In preparing financial statements, management is required to make
estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in
the financial statements and as such, actual results could differ from those estimates.

Through its subsidiaries, which include a commercial bank and an insurance agency, First Commonwealth provides a full range
of loan, deposit, trust, insurance and personal financial planning services primarily to individuals and small to middle market
businesses in 26 counties in central and western Pennsylvania as well as throughout Ohio. First Commonwealth has determined
that it has one business segment.

First Commonwealth is subject to regulations of certain state and federal agencies. These regulatory agencies periodically
examine First Commonwealth for adherence to laws and regulations.

Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of First Commonwealth previously defined above.
All material intercompany transactions have been eliminated in consolidation. Certain prior period amounts have been
reclassified to conform to the current period's presentation.

Equity investments of less than a majority but at least 20% ownership are accounted for by the equity method and classified as
“Other assets.” Earnings on these investments are reflected in “Other income” on the Consolidated Statements of Income, as
appropriate, in the period earned.

Investment Securities

Debt securities that First Commonwealth has the positive intent and ability to hold to maturity are classified as securities held to
maturity and are reported at amortized cost adjusted for amortization of premium and accretion of discount on a level yield
basis. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are to be
classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt securities
not classified as either held-to-maturity securities or trading securities are classified as securities available for sale and are
reported at fair value, with unrealized gains and losses that are not related to impairment excluded from earnings and reported
as a component of other comprehensive income, which is included in shareholders’ equity, net of deferred taxes.

First Commonwealth has securities classified as held to maturity and available for sale and does not engage in trading activities.
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 the equity securities.

First Commonwealth conducts a comprehensive review of the investment portfolio on a quarterly basis to evaluate for expected
credit losses. When evaluating available-for-sale securities, management first considers whether we intend to sell the security,
or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If there is
intent to sell, the security's amortized cost is written down to fair value through income. Otherwise, available-for-sale securities
whose market values have fallen below their book value are evaluated at the issuer-specific level to determine if the decline in
value is a result of credit losses. Issuer-specific securities include obligations of U.S. Government agencies and sponsored
enterprises, single issue trust preferred securities, corporate debentures and obligations of states and political subdivisions.
Further analysis of these securities includes a review of research reports, analysts’ recommendations, credit rating changes,
news stories, annual reports, impact of interest rate changes and any other relevant information pertaining to the affected
security. Any loss not determined to be a credit loss is recorded as a reduction to shareholders equity, through other
comprehensive income. 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.

56

Mortgage Loans Held for Sale

Certain residential mortgage loans are originated for sale in the secondary mortgage loan market with the majority sold with
servicing rights released. These loans are classified as loans held for sale and are carried at the estimated market value on an
aggregate basis. Market value is determined on the basis of rates obtained in the respective secondary market for the type of
loan held for sale. Loans are generally sold at a premium or discount from the carrying amount of the loan. Such premium or
discount is recognized at the date of sale. Gain or loss on the sale of loans is recorded in non-interest income at the time
consideration is received and all other criteria for sales treatment have been met.

Loans

Loans are carried at the principal amount outstanding. Interest is accrued as earned. Loans held for sale are carried at the lower
of cost or fair market value determined on an individual basis.

First Commonwealth considers a loan to be past due and still accruing interest when payment of interest or principal is
contractually past due but the loan is both well secured and in the process of collection. For installment, mortgage, term and
other loans with amortizing payments that are scheduled monthly, 90 days past due is reached when four monthly payments are
due and unpaid. For demand, time and other multi-payment obligations with payments scheduled other than monthly,
delinquency status is calculated using number of days instead of number of payments. Revolving credit loans, including
personal credit lines and home equity lines, are considered to be 90 days past due when the borrower has not made the
minimum payment for four monthly cycles.

A loan is placed in nonaccrual status when, based on current information and events, it is probable that First Commonwealth
will be unable to fully collect principal or interest due according to the contractual terms of the loan. A loan is also placed in
nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial
condition of the borrower. When a determination is made to place a loan in nonaccrual status, all accrued and unpaid interest is
reversed. Nonaccrual loans are restored to accrual status when, based on a sustained period of repayment by the borrower in
accordance with the contractual terms of the loan, First Commonwealth expects repayment of the remaining contractual
principal and interest or when the loan otherwise becomes well-secured and in the process of collection.

First Commonwealth considers a loan to be a troubled debt restructured loan when the loan 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 alternate financing sources. Troubled debt restructured loans are considered to be
nonperforming loans.

A loan is considered to be nonperforming when, based on current information and events, it is expected that First
Commonwealth will be unable to collect principal or interest that is due in accordance with contractual terms of the loan.
Nonperforming loans include nonaccrual loans and troubled debt restructured loans. Expected losses on nonperforming loans
are measured based on the present value of expected cash flows discounted at the loan’s effective interest rate or, as a practical
expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

For loans other than those that First Commonwealth expects repayment through liquidation of the collateral, when the
remaining recorded investment in the loan is less than or equal to the present value of the expected cash flows, income is
applied as a reduction to loan principal rather than interest income.

Loans deemed uncollectible are charged off through the allowance for credit losses. Factors considered in assessing ultimate
collectability include past due status, financial condition of the borrower, collateral values and debt covenants including
secondary sources of repayment by guarantors. Payments received on previously charged off loans are recorded as recoveries in
the allowance for credit losses.

Acquired loans are recorded at estimated fair value on the date of acquisition with no carryover of the related allowance for
credit losses. The fair value of acquired loans is determined by estimating the principal and interest cash flows expected to be
collected on the loans and discounting those cash flows at a market rate of interest. The estimated fair value considers factors
such as loan term, internal risk rating, delinquency status, prepayment rates, estimated value of the underlying collateral and the
current interest rate environment.

Loan Fees

Loan origination and commitment fees, net of associated direct costs, are deferred and the net amount is amortized as an
adjustment to the related loan yield on the interest method, generally over the contractual life of the related loans or
commitments.

57

Other Real Estate Owned

Real estate, other than bank premises, is recorded at fair value less estimated selling costs at the time of acquisition. After that
time, other real estate is carried at the lower of cost or fair value less estimated costs to sell. Fair value is determined based on
an independent appraisal. Expenses related to holding the property and rental income earned on the property are generally
reflected in earnings in the current period. Depreciation is not recorded on the other real estate owned properties.

Allowance for Credit Losses for Loans

On January 1, 2020, First Commonwealth adopted ASU 2016-13 Financial Instruments - Credit Losses ("Topic 326"), which
replaces the incurred loss methodology for determining our allowance for credit losses and related provision for credit losses
with an expected loss methodology that is referred to as the Current Expected Credit Loss ("CECL") model. The measurement
of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including
our loans.

We adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-
balance sheet credit exposures and recognized a cumulative effect adjustment reducing retained earnings by $11.2 million, net
of tax. First Commonwealth made the accounting policy election to exclude accrued interest from the allowance for credit loss
calculation because these balances are written off or reversed when a loan is placed in non-accrual status.

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments, as compared to loan
segments under the incurred model, to align with the methodology applied in determining the allowance under CECL. Refer to
Note 8, " Loans and Allowance for Credit Losses" for further discussion of these portfolio segments.

Under CECL, 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 includes a forecast of macroeconomic factors, using a weighted forecast from a nationally
recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to
the historical mean over a one-year period.

Results for reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts
continue to be reported in accordance with previously applicable GAAP.

Prior to January 1, 2020, the allowance for credit losses was estimated based on management's assessment of probable
estimated losses. In addition to loan category, the major loan classifications used in the allowance for credit losses calculation
include pass, other assets especially mentioned (“OAEM”), substandard and doubtful. Additional information related to these
credit quality categories is provided in Note 8, "Loans and Allowance for Credit Losses." Under this incurred methodology, the
allowance calculation uses net historical charge-off trends to estimate probable unconfirmed losses for each loan category.

A multiplier known as the emergence factor is applied to the historical loss rates for non-criticized loans. The emergence factor
is calculated by loan category and represents the average time period from when a loss is incurred until the bank experiences a
charge-off against the loan. Before applying the adjusted historical loss experience percentages, loan balances are reduced by
the portion of the loan balances which are subject to guarantee by a government agency.

Under the incurred model, loans acquired with evidence of credit deterioration were evaluated and not considered to be
significant. The premium or discount estimated through the loan fair value calculation is recognized in interest income on a
level yield or straight-line basis over the remaining contractual life of the loans. Additional credit deterioration on acquired
loans, in excess of the original credit discount embedded in the fair value determination on the date of acquisition, was
recognized in the allowance for credit losses through the provision for loan losses.

As part of both CECL and the incurred methodology, all nonperforming credits, which includes nonaccrual loans and all
troubled debt restructurings ("TDRs"), in excess of $250 thousand are individually evaluated on a quarterly basis. A specific
reserve is established for individually evaluated loans in an amount equal to the total amount of estimated losses for the loans
that are reviewed. Based on this reserve as a percentage of reviewed loan balances, a reserve is also established for the
nonperforming loan balances that are not individually reviewed.

An additional component of the allowance is determined by management based on a qualitative analysis of certain factors
related to portfolio risks that are not incorporated in the calculated model. Factors considered by management include lending
practices, ability and experience of the credit staff, the overall lending environment and external factors such as the regulatory
environment and competition. Portfolio risks include unusual changes or recent trends in specific portfolios such as unexpected
changes in the trends or levels of delinquency. No matter how detailed an analysis of potential credit losses is performed, these

58

estimates are inherently imprecise. Management must make estimates using assumptions and information that is often
subjective and changes rapidly.

Allowance for Off-Balance Sheet Credit Exposures

First Commonwealth maintains an allowance for off-balance sheet credit exposure at a level deemed sufficient to absorb losses
that are inherent to off-balance sheet credit risk. Off-balance sheet credit exposure includes commitments to extend credit,
standby letters of credit and commercial letters of credit. The Company’s methodology for assessing the appropriateness of the
allowance for off-balance sheet credit exposure consists of analysis of historical usage trends. The calculation begins with
historical usage trends related to lines of credit as well as letters of credit and then utilizes those figures to determine the
probable usage of available lines. These values are then adjusted by the expected loss percentage calculated for comparable loan
categories as part of the allowance for credit losses for loans. This amount is adjusted quarterly and any change to the allowance
is reported as part of provision expense on the Consolidated Statements of Income. The allowance for off-balance sheet credit
exposures is reflected in "Other Liabilities" in the Consolidated Statements of Finance Condition.

Bank Owned Life Insurance

First Commonwealth and the banks that First Commonwealth has acquired have purchased insurance on the lives of certain
groups of employees. The policies accumulate asset values to meet future liabilities, including the payment of employee
benefits such as health care. Increases in the cash surrender value are recorded as non-interest income in the Consolidated
Statements of Income and cash receipts and disbursements are included in "Operating Activities" in the Consolidated
Statements of Cash Flows. Under some of these policies, the beneficiaries receive a portion of the death benefit. The net present
value of the future death benefits scheduled to be paid to the beneficiaries was $4.5 million and $4.6 million as of December 31,
2021 and 2020, respectively, and is reflected in "Other Liabilities" on the Consolidated Statements of Financial Condition.

Premises, Equipment and Lease Commitments

Premises and equipment are carried at cost less accumulated depreciation on First Commonwealth’s Consolidated Statements of
Financial Condition. Depreciation is computed on the straight-line and accelerated methods over the estimated useful life of the
asset. A straight-line depreciation method was used for substantially all furniture and equipment. The straight-line depreciation
method was used for buildings and improvements. Charges for maintenance and repairs are expensed as incurred. Leasehold
improvements are expensed over the term of the lease or the estimated useful life of the improvement, whichever is shorter.

Software costs are amortized on a straight-line basis over a period not to exceed 7 years.

A right-of-use asset and related lease liability is recognized on the Consolidated Statements of Financial Condition for operating
leases First Commonwealth has entered to lease certain office facilities. These amounts are reported as components of premises
and equipment and other liabilities. Short-term operating leases, which are leases with an original term of 12 months or less and
do not have a purchase option that is likely to be exercised, are not recognized as part of the right-of-use asset or lease liability.
First Commonwealth has no material leasing arrangements for which it is the lessor of property or equipment.

Business Combinations

Business combinations are accounted for by using the acquisition method of accounting. Under the acquisition method,
identifiable assets acquired and liabilities assumed at the acquisition date are measured at their fair values as of that date, and
are recognized separately from goodwill. The difference between the purchase price and the fair value of the net assets acquired
is recorded as goodwill. Results of operations of the acquired entities are included in the consolidated statement of income from
the date of acquisition. Acquisition costs are expensed when incurred.

Goodwill

Intangible assets resulting from acquisitions under the purchase method of accounting consist of goodwill and other intangible
assets (see “Other Intangible Assets” section below). Goodwill is not amortized and is subject to at least annual assessments for
impairment. First Commonwealth reviews goodwill annually and again at any quarter-end if a material event occurs during the
quarter that may affect goodwill. 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 is performed. Goodwill is evaluated for potential
impairment by determining if our fair value has fallen below carrying value.

Other Intangible Assets

Other intangible assets consist of core deposits and customer lists obtained through acquisitions. Core deposit intangibles are
amortized over their estimated lives using the present value of the benefit of the core deposits and straight-line methods of
amortization. Customer list intangibles are amortized over the expected lives using expected cash flows based on retention of

59

the customer base. These intangibles are evaluated for impairment on an annual basis and when events or changes in
circumstances indicate that the carrying amount may not be recoverable.

Accounting for the Impairment of Long-Lived Assets

First Commonwealth reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These changes in
circumstances may include a significant decrease in the market value of an asset or the extent or manner in which an asset is
used. If there is an indication that the carrying amount of an asset may not be recoverable, future undiscounted cash flows
expected to result from the use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of
the asset, a loss is recognized for the difference between the carrying value and fair value of the asset. Long-lived assets
classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. Depreciation or
amortization is discontinued on long-lived assets classified as held for sale.

Income Taxes

First Commonwealth records taxes in accordance with the asset and liability method of FASB ASC Topic 740, “Income
Taxes,” ("Topic 740") whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given
the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are
more likely than not expected to be realized based upon available evidence. In accordance with Topic 740, interest or penalties
incurred for taxes will be recorded as a component of noninterest expense.

Comprehensive Income Disclosures

“Other Comprehensive Income” (comprehensive income, excluding net income) includes the after-tax effect of changes in
unrealized holding gains and losses on available-for-sale securities, changes in the funded status of defined benefit
postretirement plans and changes in the fair value of cash flow hedges. Comprehensive income is reported in the accompanying
Consolidated Statements of Comprehensive Income, net of tax.

Cash and Cash Equivalents

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.

Derivatives and Hedging Activities

First Commonwealth accounts for derivative instruments and hedging activities in accordance with FASB ASC Topic 815,
“Derivatives and Hedging" ("Topic 815"). All derivatives are evaluated at inception as to whether or not they are hedging or
non-hedging activities, and appropriate documentation is maintained to support the final determination. First Commonwealth
recognizes all derivatives as either assets or liabilities on the Consolidated Statements of Financial Condition and measures
those instruments at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and
the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the
income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value
of the effective portion of the cash flow hedges are reported in other comprehensive income ("OCI"). When the cash flows
associated with the hedged item are realized, the gain or loss included in OCI is recognized in the Consolidated Statement of
Income.

When First Commonwealth purchases a portion of a commercial loan that has an existing interest rate swap, it enters a Risk
Participation Agreement with the counterparty and assumes the credit risk of the loan customer related to the swap. Any fee
paid to First Commonwealth as a result of the risk participation agreement is offset by credit risk of the counterparties and is
recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk
rating, probability of default and loss given default of the counterparties.

Management periodically reviews contracts from various functional areas of First Commonwealth to identify potential
derivatives embedded within selected contracts. As of December 31, 2021, First Commonwealth has interest rate derivative
positions that are designated as hedging instruments and others that are not designated as hedging instruments. See Note 6,
“Derivatives,” for a description of these instruments.

Earnings Per Common Share

Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period.

60

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of
the entity. For all periods presented, the dilutive effect on average shares outstanding is the result of unvested restricted stock
grants.

Fair Value Measurements

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures" ("Topic 820"), First Commonwealth
groups financial assets and financial liabilities measured at fair value into three levels, based on the markets in which the assets
and liabilities are traded and the reliability of the assumptions 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
identical or comparable assets or liabilities from alternative pricing sources with reasonable levels of price transparency.
Level 2 securities include U.S. Government securities issued by Agencies and Sponsored Enterprises, Obligations of
States and Political Subdivisions, certain corporate securities, FHLB stock, loans held for sale, interest rate derivatives
that include interest rate swaps, risk participation agreements and foreign currency contracts, certain other real estate
owned and certain nonperforming loans.

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 evaluation 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 nonmarketable equity investments, certain other real estate owned and
certain nonperforming loans.

In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market
prices are not available, fair value is based upon pricing models that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These
adjustments may include amounts to reflect counterparty credit quality and our creditworthiness, among other things, as well as
unobservable parameters. Any such valuation adjustments are applied consistently over time. See Note 16 “Fair Values of
Assets and Liabilities” for additional information.

Revenue from Contracts with Customers

First Commonwealth records revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from
Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify
the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance
obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation.

A significant component of the Company's revenue, net interest earned on financial assets and liabilities, is excluded from the
scope of Topic 606. First Commonwealth generally fully satisfies its performance obligations on its contracts with customers as
services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity.
Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, the Company has
made no significant judgments in applying the revenue guidance prescribed in Topic 606 that affect the determination of the
amount and timing of revenue from contracts with customers.

61

Note 2—Supplemental Comprehensive Income Disclosures

The following table identifies the related tax effects allocated to each component of other comprehensive income in the
Consolidated Statements of Comprehensive Income as of December 31. Reclassification adjustments related to securities
available for sale are included in the “Net securities gains” line in the Consolidated Statements of Income.

2021

2020

2019

Pretax
Amount

Tax
(Expense)
Benefit

Net of Tax
Amount

Pretax
Amount

Tax
(Expense)
Benefit

Net of
Tax
Amount

Pretax
Amount

Tax
(Expense)
Benefit

Net of Tax
Amount

(dollars in thousands)

$ (29,892) $ 6,278

$ (23,614) $ 19,981

$ (4,196) $ 15,785

$ 20,625

$ (4,331) $ 16,294

(16)

3

(13)

(70)

15

(55)

(22)

5

(17)

(29,908)

6,281

(23,627)

19,911

(4,181)

15,730

20,603

(4,326)

16,277

(3,356)

(3,356)

76

275

705

705

(16)

(58)

(2,651)

(4,467)

938

(3,529)

(2,651)

(4,467)

938

(3,529)

935

935

(196)

(196)

60

217

(537)

(155)

113

32

(424)

(123)

—

(121)

739

739

—

(96)

(96)

—

25

25

351

(74)

277

(692)

145

(547)

(121)

$ (32,913) $ 6,912

$ (26,001) $ 14,752

$ (3,098) $ 11,654

$ 21,417

$ (4,497) $ 16,920

Unrealized gains (losses) on
securities:

Unrealized holding (losses)
gains on securities arising
during the period

Reclassification adjustment
for gains on securities
included in net income

Total unrealized (losses)
gains on securities

Unrealized gains (losses) on
derivatives:

Unrealized holding (losses)
gains on derivatives arising
during the period

Total unrealized (losses)
gains on derivatives

Unrealized gains (losses) for
postretirement obligations:

Prior service cost

Net gain (loss)

Total unrealized gains
(losses) for
postretirement
obligations

Total other
comprehensive
(loss) income

62

The following table details the change in components of OCI for the year-ended December 31:

2021

Securities Available
for Sale

Derivatives

Post-Retirement
Obligation

Accumulated Other
Comprehensive
Income

(dollars in thousands)

Balance at January 1

$

20,310

$

(2,895) $

(182) $

17,233

Other comprehensive loss before reclassification
adjustment

Amounts reclassified from accumulated other
comprehensive income (loss)

(23,614)

(2,651)

(13)

—

Prior service cost

Net gain

Net other comprehensive loss during the period

Balance at December 31

(23,627)

(3,317) $

$

(2,651)

(5,546) $

(26,265)

(13)

60

217

(26,001)

(8,768)

60

217

277

95

$

Securities Available
for Sale

Derivatives

Post-Retirement
Obligation

Accumulated Other
Comprehensive
Income

2020

Balance at January 1

Other comprehensive income before reclassification
adjustment
Amounts reclassified from accumulated other
comprehensive income (loss)

Net gain

Net other comprehensive income during the period

Balance at December 31

$

$

(dollars in thousands)

4,580

$

634

$

365

$

15,785

(55)

(3,529)

—

15,730

20,310

$

(3,529)

(2,895) $

2019

(123)

(547)

(182) $

5,579

12,256

(55)

(123)

11,654

17,233

Securities Available
for Sale

Derivatives

Post-Retirement
Obligation

Accumulated Other
Comprehensive
Income

(dollars in thousands)

Balance at January 1

$

(11,697) $

(105) $

461

$

(11,341)

Other comprehensive income before reclassification
adjustment
Amounts reclassified from accumulated other
comprehensive income (loss)

16,294

(17)

Net gain

Net other comprehensive income during the period

Balance at December 31

$

16,277

4,580

$

739

—

739

634

$

17,033

(17)

(96)

16,920

5,579

(96)

(96)

365

$

63

Note 3—Supplemental Cash Flow Disclosures

The following table presents information related to cash paid during the year for interest and income taxes as well as detail on
non-cash investing and financing activities for the years ended December 31:

Cash paid during the period for:

Interest

Income taxes

Non-cash investing and financing activities:

Loans transferred to other real estate owned and repossessed assets

Fair value of loans transferred from held to maturity to held for sale

Loans transferred from held for sale to held to maturity
Gross (decrease) increase in market value adjustment to securities
available for sale

Gross (decrease) increase in market value adjustment to derivatives

Investments committed to purchase, not settled

Increase in limited partnership investment unfunded commitment

Net assets (liabilities) acquired through acquisition

Proceeds from death benefit on bank-owned life insurance not received

Treasury shares issued

Note 4—Earnings per Share

2021

2020

2019

(dollars in thousands)

$

15,624

$

33,964

$

22,374

25,914

3,163

73,697

—

(29,908)

(3,356)

—

7,565

—

—

2,042

3,865

37,305

4,335

19,911

(4,467)

(34,185)

—

—

(384)

1,594

56,005

21,787

4,723

30,359

482

20,604

935

25,484

1,469

(361,595)

484

2,531

The following table summarizes the composition of the weighted-average common shares (denominator) used in the basic and
diluted earnings per share computation for the years ending December 31:

Weighted average common shares issued

Average treasury shares

Average deferred compensation shares

Average unearned nonvested shares

Weighted average common shares and common stock equivalents used to calculate

basic earnings per share

Additional common stock equivalents (nonvested stock) used to calculate diluted

earnings per share

Additional common stock equivalents (deferred compensation) used to calculated

diluted earnings per share

Weighted average common shares and common stock equivalents used to calculate

diluted earnings per share

Per Share Data

Basic Earnings Per Share

Diluted Earnings Per Share

2021

2020

2019

113,914,902

113,914,902

113,914,902

(18,140,857)

(16,254,304)

(15,447,299)

(55,590)

(134,565)

(42,751)

(118,261)

(37,496)

(112,320)

95,583,890

97,499,586

98,317,787

200,712

203,836

231,957

55,683

55,543

38,420

95,840,285

97,758,965

98,588,164

$

$

1.45

1.44

$

$

0.75

0.75

$

$

1.07

1.07

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 years ended December 31, because to do so would have been
anti-dilutive.

12/31/2021

Price Range

12/31/2020

Price Range

12/31/2019

Price Range

Shares

From

To

Shares

From

To

Shares

From

To

Restricted Stock

Restricted Stock Units

99,344

$

12.77

$

15.96

92,499

— $

— $

— 106,931

$

$

13.72

12.43

$

$

15.44

15.37

81,730

26,217

$

$

12.99

16.62

$

$

15.44

16.62

64

Note 5—Cash and Due from Banks

Regulations of the Board of Governors of the Federal Reserve System impose uniform reserve requirements on all depository
institutions with transaction accounts, such as checking accounts and NOW accounts. Reserves are maintained in the form of
vault cash or balances held with the local Federal Reserve Bank. First Commonwealth Bank maintained average balances of
$309.6 million during 2021 and $173.2 million during 2020 with the Federal Reserve Bank of Cleveland.

Note 6—Derivatives

Derivatives Not Designated as Hedging Instruments

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

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

We have 39 risk participation agreements with financial institution counterparties for interest rate swaps related to loans in
which we are a participant. The risk participation agreements provide credit protection to the financial institution should the
borrower fail to perform on its interest rate derivative contract with the financial institution. We have 17 risk participation
agreements with financial institution counterparties for interest rate swaps related to loans in which we are the lead bank. The
risk participation agreement provides credit protection to us should the borrower fail to perform on its interest rate derivative
contract with us.

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

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

Derivatives Designated as Hedging Instruments

In August 2019, the Company entered into two interest rate swap contracts that are designated as cash flow hedges. These
contracts mature on August 15, 2024 and August 15, 2026 and have notional amounts of $30.0 million and $40.0 million,
respectively. The Company's risk management objective for these hedges is to reduce its exposure to variability in expected
future cash flows related to interest payments made on subordinated debentures benchmarked to the 3-month LIBOR rate.
Therefore, the interest rate swaps convert the interest rate benchmark on the first $70.0 million of 3-month LIBOR based
subordinated debentures to a fixed rate.

During 2021, the Company entered into eight interest rate swap contracts that were designated as cash flow hedges. The interest
rate swaps have a total notional amount of $500.0 million; $75.0 million with an original maturity of three years, $175.0 million
with an original maturity of four years and $250.0 million with an original maturity of five years. The Company's risk
management objective for these hedges is to reduce its exposure to variability in expected future cash flows related to interest
payments on commercial loans benchmarked to the 1-month LIBOR rate. Therefore, the interest rate swaps convert the interest
payments on the first $500.0 million of 1-month LIBOR based commercial loans into fixed rate payments.

The periodic net settlement of these interest rate swaps are recorded as an adjustment to "Interest on subordinated debentures"
or "Interest and fees on loans" in the Consolidated Statement of Income. For the years ended December 31, 2021 and 2019, net
interest income increased $0.6 million and $41 thousand, respectively, and decreased $0.4 million for the year ended December
31, 2020 as a result of these interest rate swaps. Changes in the fair value of the cash flow hedges are reported on the balance

65

sheet and in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is
recognized in "Interest on subordinated debentures" or "Interest and fees on loans," in the Consolidated Statements of Income in
the same line item as the income or expense on the hedged items. The cash flow hedges were highly effective at December 31,
2021 and changes in the fair value attributed to hedge ineffectiveness were not material.

The Company also enters into interest rate lock commitments in conjunction with its mortgage origination business. These are
commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have
locked into that interest rate. The Company locks in the rate with an investor and commits to deliver the loan if settlement
occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor.
Loans under mandatory rate lock commitments are covered under forward sales contracts of mortgage-backed securities
(“MBS”). Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in "Noninterest
income" in the Consolidated Statements of Income. The impact to noninterest income for the years ended December 31, 2021
was a decrease of $0.5 million and an increase of $0.4 million and $0.1 million, respectively, for the years ended December 31,
2020 and 2019.

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 December 31, 2021, the underlying funded
mortgage loan commitments had a carrying value of $11.0 million and a fair value of $11.9 million, while the underlying
unfunded mortgage loan commitments had a notional amount of $29.7 million. At December 31, 2020, the underlying funded
mortgage loan commitments had a carrying value of $25.0 million and a fair value of $28.4 million, while the underlying
unfunded mortgage loan commitments had a notional amount of $47.9 million.

In addition, a small amount of interest income on loans is exposed to changes in foreign exchange rates. Several commercial
borrowers have a portion of their operations outside of the United States and borrow funds on a short-term basis to fund those
operations. In order to reduce the risk related to the translation of foreign denominated transactions into U.S. dollars, the
Company enters into foreign exchange forward contracts. These contracts relate principally to the Euro and the Canadian dollar.
The contracts are recorded at fair value with changes in fair value recorded in "Other operating expenses" in the Consolidated
Statements of Income. The impact on other noninterest expense for the years ended December 31, 2021 totaled $11 thousand,
$18 thousand and $5 thousand, respectively. At December 31, 2021, the underlying loans had both a carrying value and a fair
value of $2.0 million. At December 31, 2020, the underlying loans had both a carrying value and a fair value of $2.1 million.

66

The following table depicts the credit value adjustment recorded relative to the notional amount of derivatives outstanding as
well as the notional amount of risk participation agreements participated to other banks at December 31:

Derivatives not Designated as Hedging Instruments

Credit value adjustment

Notional Amount:

Interest rate derivatives

Interest rate caps

Interest rate collars

Risk participation agreements

Sold credit protection on risk participation agreements

Interest rate options

Derivatives Designated as Hedging Instruments

Interest rate swaps:

Fair value adjustment

Notional Amount

Interest rate forwards:

Fair value adjustment

Notional Amount

Foreign exchange forwards:

Fair value adjustment

Notional Amount

2021

2020

(dollars in thousands)

$

(395) $

(2,792)

708,759

66,007

35,354

241,111

(95,618)

29,691

(7,022)

570,000

(29)

38,000

12

1,982

631,446

66,527

35,354

220,280

(78,522)

47,874

(3,665)

70,000

(483)

65,000

(5)

2,119

The table below presents the amount representing the change in the fair value of derivative assets and derivative liabilities
attributable to credit risk included in “Other income” on the Consolidated Statements of Income for the years ended December
31:

Non-hedging interest rate derivatives:

Increase (decrease) in other income

Decrease in other expense

Hedging interest rate derivatives:

Increase (decrease) in interest and fees on loans
Increase (decrease) in interest from subordinated debentures

Increase in other expense

Hedging interest rate forwards:

(Decrease) increase in other income

Increase in other expense

Hedging interest rate derivatives:

Increase in other expense

2021

2020

2019

(dollars in thousands)

$

728

$

(981) $

—

1,567
959

—

(454)

—

11

—

—
449

—

420

—

18

(269)

(352)

(118)
(159)

7

106

—

5

The fair value of our derivatives is included in a table in Note 16, “Fair Values of Assets and Liabilities,” in the line items
“Other assets” and “Other liabilities.”

67

Note 7—Investment Securities

Securities Available for Sale

Below is an analysis of the amortized cost and fair values of securities available for sale at December 31:

2021

2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Amortized
Cost

(dollars in thousands)

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Obligations of U.S.
Government Agencies:

Mortgage-Backed
Securities –
Residential

Mortgage-Backed
Securities –
Commercial

Obligations of U.S.
Government-Sponsored
Enterprises:

Mortgage-Backed
Securities –
Residential

Other Government-
Sponsored Enterprises

Obligations of States and
Political Subdivisions

Corporate Securities

$

5,242

$

420

$

— $

5,662

$

6,492

$

738

$

— $

7,230

365,024

1,725

(4,459)

362,290

182,823

8,357

—

191,180

632,687

6,308

(9,021)

629,974

481,109

14,924

1,000

9,538

32,088

—

89

973

(19)

(103)

(112)

981

100,996

2

9,524

32,949

11,154

22,941

243

1,444

—

—

—

—

496,033

100,998

11,397

24,385

Total Securities
Available for Sale $1,045,579 $

9,515

$ (13,714) $1,041,380 $ 805,515

$ 25,708

$

— $ 831,223

Mortgage backed securities include mortgage backed obligations of U.S. Government agencies and obligations of U.S.
Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to
approximately 30 years with lower anticipated lives to maturity due to prepayments. All mortgage backed securities contain a
certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct
impact upon prepayment speeds; therefore, First Commonwealth uses computer simulation models to test the average life and
yield volatility of all mortgage backed securities under various interest rate scenarios to monitor the potential impact on
earnings and interest rate risk positions.

Expected maturities will differ from contractual maturities because issuers may have the right to call or repay obligations with
or without call or prepayment penalties. Other fixed income securities within the portfolio also contain prepayment risk.

The amortized cost and estimated fair value of debt securities available for sale at December 31, 2021, by contractual maturity,
are shown below:

Amortized
Cost

Estimated
Fair Value

Due within 1 year
Due after 1 but within 5 years
Due after 5 but within 10 years
Due after 10 years

Mortgage-Backed Securities (a)
Total Debt Securities

$

$

(dollars in thousands)
— $

13,874
28,752
—
42,626
1,002,953
1,045,579

$

—
14,334
29,120
—
43,454
997,926
1,041,380

(a) Mortgage Backed Securities include an amortized cost of $370.3 million and a fair value of $368.0 million for Obligations of U.S.

Government agencies issued by Ginnie Mae and an amortized cost of $632.7 million and a fair value of $630.0 million for
Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

68

Proceeds from sales of securities and gross gains (losses) realized on sales, calls and maturities of securities available for sale
were as follows for the years ended December 31:

Proceeds from sales
Gross (losses) gains realized:
Sales Transactions:
Gross gains
Gross losses

Maturities

Gross gains
Gross losses

Net gains

2021

2020

2019

(dollars in thousands)

— $

— $

948

— $
—
—

16
—
16
16

$

— $
—
—

70
—
70
70

$

—
(7)
(7)

29
—
29
22

$

$

$

Gross gains from maturities recognized in 2021, 2020 and 2019 were the result of calls on municipal securities. Gross losses on
sales transactions recognized in 2019 were the result of the sale of one municipal security after its credit rating was withdrawn.

Securities available for sale with an approximate fair value of $759.1 million and $792.1 million were pledged as of December
31, 2021 and 2020, respectively, to secure public deposits and for other purposes required or permitted by law.

69

Securities Held to Maturity

Below is an analysis of the amortized cost and fair values of debt securities held to maturity at December 31:

2021

2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Amortized
Cost

(dollars in thousands)

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

$

2,409

$

101

$

— $

2,510

$

2,766

$

138

$

— $

2,904

91,439

305

(1,939)

89,805

36,799

1,441

—

38,240

387,848

2,800

(5,758)

384,890

277,351

5,389

(10)

282,730

7,309

21,904

29,402

1,000

148

—

414

—

—

7,457

9,737

(625)

21,279

—

(103)

29,713

34,391

(3)

997

800

344

—

705

—

—

—

—

—

10,081

—

35,096

800

$ 541,311

$

3,768

$

(8,428) $ 536,651

$ 361,844

$

8,017

$

(10) $ 369,851

Obligations of U.S.
Government Agencies:

Mortgage-Backed
Securities –
Residential

Mortgage-Backed
Securities –
Commercial

Obligations of U.S.
Government-Sponsored
Enterprises:

Mortgage-Backed
Securities –
Residential

Mortgage-Backed
Securities –
Commercial

Other Government-
Sponsored Enterprises

Obligations of States and
Political Subdivisions

Debt Securities Issued by
Foreign Governments

Total Securities
Held to Maturity

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

Due within 1 year

Due after 1 but within 5 years

Due after 5 but within 10 years

Due after 10 years

Mortgage-Backed Securities (a)

Total Debt Securities

Amortized
Cost

Estimated
Fair Value

(dollars in thousands)

908

$

7,610

43,226

562

52,306

489,005

541,311

$

918

7,653

42,846

572

51,989

484,662

536,651

$

$

(a) Mortgage Backed Securities include an amortized cost of $93.8 million and a fair value of $92.3 million for Obligations of U.S.
Government agencies issued by Ginnie Mae and an amortized cost of $395.2 million and a fair value of $392.3 million for
Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Securities held to maturity with an amortized cost of $313.9 million and $228.1 million were pledged as of December 31, 2021
and 2020, respectively, to secure public deposits 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

70

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 December 31, 2021 and 2020,
our FHLB stock totaled $11.7 million and $10.6 million, respectively and is included in “Other investments” on the
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 for the year ended December 31, 2021.

At both December 31, 2021 and 2020, Other Investments also includes $1.2 million and $1.7 million, respectively, in equity
securities. These securities do not have a readily determinable fair value and are carried at cost. For the years ended December
31, 2021 and 2020, there were no gains or losses recognized through earnings on equity securities. On a quarterly basis,
management evaluates equity securities by reviewing 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

On January 1, 2020, First Commonwealth adopted Topic 326, which requires estimated credit losses on held to maturity
securities be recorded as an allowance for credit loss instead of a reduction in the amortized cost of the securities. Prior to the
adoption of ASU 2016-13, credit related other-than-temporary impairment on debt securities was recognized in earnings while
non-credit related other-than-temporary impairment on debt securities not expected to be sold was recognized in OCI.

There were no estimated credit losses recorded during the years ended December 31, 2021 and 2020. During the year ended
December 31, 2019, no other-than-temporary impairment charges were recognized.

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

We review our investment portfolio on a quarterly basis for indications of impairment. 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.

The following table presents the gross unrealized losses and estimated fair values at December 31, 2021 for available for sale
securities for which an allowance for credit losses has not been recorded and held to maturity securities by investment category
and time frame for which the securities have been in a continuous unrealized loss position:

Less Than 12 Months

12 Months or More

Total

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

(dollars in thousands)

$ 320,414

$

(6,398) $

— $

— $ 320,414

$

(6,398)

658,965

22,261

11,213

997

19,013

(14,779)

(644)

(206)

(3)

(112)

—

—

—

—

—

—

—

—

—

—

658,965

22,261

11,213

997

19,013

(14,779)

(644)

(206)

(3)

(112)

$ 1,032,863

$

(22,142) $

— $

— $ 1,032,863

$

(22,142)

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities –
Commercial

Obligations of U.S. Government-Sponsored
Enterprises:

Mortgage-Backed Securities – Residential

Other Government-Sponsored Enterprises

Obligations of States and Political
Subdivisions

Debt Securities Issued by Foreign
Governments

Corporate Securities

Total Securities

71

At December 31, 2021, fixed income securities issued by U.S., Government Agencies and U.S. Government-sponsored
enterprises comprised 99% of total unrealized losses. All unrealized losses are a result of changes in market interest rates. At
December 31, 2021, there were 66 debt securities in an unrealized loss position, all of which were in an unrealized loss position
of less than 12 months. There were no equity securities in an unrealized loss position at December 31, 2021.

The following table presents the gross unrealized losses and estimated fair value at December 31, 2020 for both available for
sale and held to maturity securities by investment category and time frame for which the securities had been in a continuous
unrealized loss position:

Less Than 12 Months

12 Months or More

Total

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

(dollars in thousands)

Obligations of U.S. Government-Sponsored
Enterprises:

Mortgage-Backed Securities – Residential

Total Securities

$

$

3,755

3,755

$

$

(10) $

(10) $

— $

— $

— $

— $

3,755

3,755

$

$

(10)

(10)

As of December 31, 2021, our corporate securities had an amortized cost and estimated fair value of $32.1 million and $32.9
million, respectively, and were comprised of debt for large regional banks. At December 31, 2020, these securities had an
amortized cost of $22.9 million and estimated fair value of $24.4 million. When unrealized losses exist, management reviews
each of the issuer’s asset quality, earnings trend 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 twelve months ended
December 31, 2021 and 2020. Prior to 2020, investment securities were evaluated for other-than-temporary impairment.

Note 8—Loans and Allowance for Credit Losses

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

2021

2020

(dollars in thousands)

Commercial, financial, agricultural and other

$

1,173,452

$

Time and demand

Commercial credit cards

Real estate construction
Residential real estate

Residential first lien

Residential junior lien/home equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied
Loans to individuals

Automobile

Consumer credit cards

Consumer other
Total loans

72

1,159,524

13,928

494,456
1,920,250

1,299,534

620,716

2,251,097

385,432

1,465,247

400,418

999,975

901,280

11,151

87,544

1,555,986

1,541,382

14,604

427,221
1,750,592

1,144,323

606,269

2,211,569

371,239

1,421,151

419,179

815,815

712,800

12,360

90,655

$

6,839,230

$

6,761,183

Commercial, financial, agricultural and other loans at December 31, 2021 and 2020 includes $71.3 million and $478.9 million,
respectively, in PPP loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed
by the SBA under the CARES Act and are forgivable, in whole or in part, if the proceeds are used for payroll and other
permitted purposes in accordance with the PPP requirements. Because PPP loans are fully guaranteed by the SBA, there is no
allowance for credit losses recognized for these loans. 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.

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

Commercial, financial, agricultural and other

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

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

Real estate construction

Includes both 1-4 family and commercial construction loans. The risk and loss characteristics of the construction category are
different than other real estate secured categories due to the collateral being at various stages of completion. The primary
macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and measures
of completed construction projects.

Residential real estate

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

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

Commercial real estate

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

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

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

Loans to individuals

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

73

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

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

The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted
cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default
represents an estimate of the likelihood of default and loss given default measures the expected loss upon default. Inputs
impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally
recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to
the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the
national unemployment rate. The forecasted value for national unemployment at December 31, 2021 was 4.34% and during the
one-year forecast period it was projected to average 4.75%, with a peak of 4.91%.

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 commercial 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)

Substandard

Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in
deterioration of the repayment prospects or weaken the Bank’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.

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

Doubtful

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

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

The following tables represent our credit risk profile by creditworthiness category for the years ended December 31:

74

Pass

OAEM

Substandard

Doubtful

Loss

Total Non-
Pass

Total

(dollars in thousands)

Commercial, financial,
agricultural and other

$

1,121,234

$

33,765

$

18,453

$

— $

— $

52,218

$

1,173,452

2021

Non-Pass

Time and demand

1,107,306

33,765

18,453

Commercial credit
cards

Real estate
construction

Residential real estate

Residential first lien

Residential junior lien/
home equity

13,928

493,913

1,913,064

1,295,524

617,540

Commercial real estate

2,113,123

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

355,702

1,368,922

388,499

999,770

901,132

11,151

87,487

—

498

976

905

71

85,324

14,565

63,783

6,976

—

—

—

—

—

45

6,210

3,105

3,105

52,650

15,165

32,542

4,943

205

148

—

57

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

52,218

1,159,524

—

13,928

543

7,186

4,010

494,456

1,920,250

1,299,534

3,176

620,716

137,974

2,251,097

29,730

96,325

11,919

205

148

—

57

385,432

1,465,247

400,418

999,975

901,280

11,151

87,544

$

6,641,104

$

120,563

$

77,563

$

— $

— $

198,126

$

6,839,230

Pass

OAEM

Substandard

Doubtful

Loss

Total Non-
Pass

Total

(dollars in thousands)

Commercial, financial,
agricultural and other

$

1,491,916

$

48,233

$

15,837

$

— $

— $

64,070

$

1,555,986

2020

Non-Pass

Time and demand

1,477,312

48,233

15,837

—

54

7,698

4,134

3,564

52,316

1,225

43,563

7,528

274

261

—

13

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

64,070

1,541,382

—

14,604

558

9,600

5,914

427,221

1,750,592

1,144,323

3,686

606,269

228,311

2,211,569

1,356

204,899

22,056

274

261

—

13

371,239

1,421,151

419,179

815,815

712,800

12,360

90,655

$

6,458,370

$

226,634

$

76,179

$

— $

— $

302,813

$

6,761,183

Commercial credit
cards

Real estate
construction

Residential real estate

Residential first lien

Residential junior lien/
home equity

14,604

426,663

1,740,992

1,138,409

602,583

—

504

1,902

1,780

122

Commercial real estate

1,983,258

175,995

369,883

1,216,252

397,123

815,541

712,539

12,360

90,642

131

161,336

14,528

—

—

—

—

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

75

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by
origination year as of December 31:

2021

Term Loans

2021

2020

2019

2018

2017

Prior

(dollars in thousands)

Revolving
Loans

Total

Time and demand

$ 281,244

$ 126,403

$ 143,030

$

91,118

$

45,442

$ 111,127

$ 361,160

$1,159,524

Pass

OAEM

Substandard

Commercial credit cards

Pass

Real estate construction

Pass

OAEM

Substandard

Residential first lien

Pass

OAEM

Substandard

Residential junior lien/home
equity

Pass

OAEM

Substandard

Multifamily

Pass

OAEM

Substandard

Nonowner occupied

Pass

OAEM

Substandard

Owner occupied

Pass

OAEM

Substandard

Automobile

Pass

Substandard

Consumer credit cards

Pass

Consumer other

Pass

Substandard

Total

280,854

125,728

128,080

83,204

390

—

—

—

596

79

—

—

1,125

13,825

—

—

202,016

201,992

129,298

128,824

123,153

123,153

24

—

474

—

—

—

376,106

376,095

375,904

375,885

126,788

126,618

—

11

56,861

56,861

—

—

90,062

90,062

—

—

—

19

1,999

1,999

—

—

73,068

73,068

—

—

—

170

3,322

3,246

—

76

16,782

16,782

—

—

194,137

194,137

98,840

98,840

202,236

202,236

—

—

77,710

77,710

—

—

456,730

456,730

—

—

—

22,156

22,156

—

—

—

62,380

59,973

2,194

213

252,518

252,518

—

—

—

4,655

4,655

—

—

—

53,954

51,513

1,220

1,221

122,943

122,867

76

—

—

8,030

8,030

—

7,780

134

—

—

38,267

38,267

—

—

84,484

84,079

67

338

2,684

2,684

—

—

36,523

21,846

—

14,677

173,053

155,293

3,723

14,037

34,115

33,623

492

—

48,375

48,361

14

—

—

5,084

5,084

—

31,472

13,945

25

—

—

441

441

—

—

74,268

74,135

—

133

1,009

1,009

—

—

63,872

49,832

14,040

—

177,295

152,174

19,235

5,886

32,989

31,644

1,321

24

17,230

17,224

6

—

—

542

542

—

102,399

355,569

1,107,306

7,126

1,602

—

—

841

796

—

45

2,803

2,788

13,928

13,928

440

440

—

—

33,765

18,453

13,928

13,928

494,456

493,913

498

45

260,010

256,815

1,974

1,897

1,299,534

1,295,524

761

2,434

5,348

5,195

61

92

103,774

102,761

525

488

615,943

563,743

39,737

12,463

134,713

129,593

1,716

3,404

3,484

3,432

52

—

—

5,503

5,460

43

77

—

549,493

546,546

10

2,937

1,351

1,351

—

—

3,743

2,499

1,088

156

4,557

4,443

33

81

—

—

—

11,151

11,151

41,574

41,560

14

905

3,105

620,716

617,540

71

3,105

385,432

355,702

14,565

15,165

1,465,247

1,368,922

63,783

32,542

400,418

388,499

6,976

4,943

901,280

901,132

148

11,151

11,151

87,544

87,487

57

$1,757,022

$1,125,065

$ 800,238

$ 513,703

$ 413,088

$1,240,743

$ 989,371

$6,839,230

76

2020

Term Loans

2020

2019

2018

2017

2016

Prior

(dollars in thousands)

Revolving
Loans

Total

Time and demand

$ 598,053

$ 193,601

$ 142,224

$

72,277

$

74,228

$

83,313

$ 377,686

$1,541,382

Pass

OAEM

Substandard

Commercial credit cards

Pass

Real estate construction

Pass

OAEM

Substandard

Residential first lien

Pass

OAEM

Substandard

Residential junior lien/home
equity

Pass

OAEM

Substandard

Multifamily

Pass

OAEM

Substandard

Nonowner occupied

Pass

OAEM

Substandard

Owner occupied

Pass

OAEM

Substandard

Automobile

Pass

Substandard

Consumer credit cards

Pass

Consumer other

Pass

Substandard

Total

Portfolio Risks

597,405

189,834

140,473

63,137

93

555

—

—

3,373

394

—

—

972

779

—

—

150,493

150,493

133,195

133,195

104,167

104,167

—

—

—

—

—

—

8,820

320

—

—

34,803

34,803

—

—

316,052

316,028

184,550

184,533

142,823

142,467

110,365

110,260

—

24

3,055

3,055

—

—

76,249

76,249

—

—

105,861

105,861

—

—

59,519

58,551

968

—

350,293

350,293

—

—

—

7,814

7,814

—

—

17

5,783

5,698

—

85

16,287

16,287

—

—

199,280

190,301

8,979

—

72,313

70,726

684

903

202,923

202,827

96

—

—

14,464

14,464

—

83

273

4,545

4,545

—

—

69,439

69,439

—

—

161,018

139,643

21,375

—

61,079

55,478

4,736

865

96,355

96,336

19

—

—

10,752

10,752

—

—

105

2,005

2,005

—

—

66,963

66,963

—

—

214,915

181,659

26,339

6,917

40,796

39,351

1,421

24

45,218

45,187

31

—

—

1,965

1,965

—

68,007

6,182

39

—

—

389

389

—

—

91,495

91,059

100

336

1,303

1,303

—

—

34,383

34,383

—

—

217,883

175,148

37,762

4,973

27,415

26,359

114

942

14,285

14,255

30

—

—

711

711

—

65,418

353,038

1,477,312

8,043

9,852

—

—

1,009

709

246

54

297,057

292,158

1,520

3,379

7,127

6,909

112

106

106,328

104,972

131

1,225

518,052

419,900

66,752

31,400

152,555

141,376

6,572

4,607

3,726

3,641

85

—

—

6,383

6,373

10

20,750

3,898

14,604

14,604

3,165

2,907

258

—

1,981

1,904

77

—

582,451

579,068

10

3,373

1,590

1,590

—

—

4,142

3,740

129

273

5,502

5,282

33

187

—

—

—

12,360

12,360

48,566

48,563

3

48,233

15,837

14,604

14,604

427,221

426,663

504

54

1,144,323

1,138,409

1,780

4,134

606,269

602,583

122

3,564

371,239

369,883

131

1,225

1,421,151

1,216,252

161,336

43,563

419,179

397,123

14,528

7,528

712,800

712,539

261

12,360

12,360

90,655

90,642

13

$1,667,389

$1,022,396

$ 792,402

$ 589,307

$ 462,092

$1,175,550

$1,052,047

$6,761,183

The credit quality of our loan portfolio can potentially represent significant risk to our earnings, capital and liquidity. First
Commonwealth devotes a substantial amount of resources 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.

77

Total gross charge-offs for the years ended December 31, 2021 and 2020 were $13.1 million and $19.3 million, respectively.

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of December 31. 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.

2021

30 - 59
days
past due

60 - 89
days
past
due

90 days
and
greater
and still
accruing

Nonaccrual

Total past
due and
nonaccrual

(dollars in thousands)

Current

Total

$

633

605

28

813

3,393

1,934

1,459

—

—

—

—

1,611

1,228

36

347

$

987

972

15

—

983

354

629

74

—

—

74

417

175

44

198

155

144

11

448

218

51

167

—

—

—

—

785

199

63

523

$

2,006

$

3,781

$ 1,169,671

$ 1,173,452

2,006

3,727

1,155,797

1,159,524

—

45

5,608

2,706

2,902

40,195

15,097

23,930

1,168

206

148

—

58

54

1,306

10,202

5,045

5,157

40,269

15,097

23,930

1,242

3,019

1,750

143

1,126

13,874

493,150

13,928

494,456

1,910,048

1,920,250

1,294,489

1,299,534

615,559

620,716

2,210,828

2,251,097

370,335

385,432

1,441,317

1,465,247

399,176

996,956

899,530

11,008

86,418

400,418

999,975

901,280

11,151

87,544

$

6,450

$

2,461

$

1,606

$

48,060

$

58,577

$ 6,780,653

$ 6,839,230

$

Commercial, financial,
agricultural and other

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home
equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

78

2020

30 - 59
days
past due

60 - 89
days
past
due

90 days
and
greater
and still
accruing

Nonaccrual

Total past
due and
nonaccrual

(dollars in thousands)

Current

Total

$

146

$

97

49

936

3,883

1,775

2,108

237

—

18

219

2,870

2,090

52

728

62

28

34

—

1,492

660

832

160

—

104

56

852

417

39

396

$

112

$

3,317

$

3,637

$ 1,552,349

$ 1,555,986

23

89

—

769

267

502

3

—

—

3

639

94

123

422

3,317

3,465

1,537,917

1,541,382

—

54

6,824

3,489

3,335

35,072

460

31,822

2,790

274

261

—

13

172

990

12,968

6,191

6,777

35,472

460

14,432

426,231

14,604

427,221

1,737,624

1,750,592

1,138,132

1,144,323

599,492

606,269

2,176,097

2,211,569

370,779

371,239

31,944

1,389,207

1,421,151

3,068

4,635

2,862

214

1,559

416,111

811,180

709,938

12,146

89,096

419,179

815,815

712,800

12,360

90,655

$

8,072

$

2,566

$

1,523

$

45,541

$

57,702

$ 6,703,481

$ 6,761,183

Commercial, financial,
agricultural and other

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home
equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

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 in 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 become 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 includes 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 or repayment for the loan is the operation or liquidation of collateral. When
the loan is collateral dependent, the appraised value less estimated cost to sell is utilized. If management determines the value of
the loan is less than the recorded investment in the loan, a credit loss is recognized through an allowance 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.

There were no nonperforming loan held for sale at December 31, 2021 and one nonperforming loan totaling $13 thousand held
for sale as of December 31, 2020. Total gains of $0.4 million on nonperforming loans held for sale during both of the years

79

ended December 31, 2021 and 2019. There were no gains on sale of nonperforming loans recognized during the year ended
December 31, 2020.

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated
allowance amount, if applicable, as of December 31, 2021 and 2020. Also presented are the average recorded investment in
nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming for the years
ended December 31, 2021, 2020 and 2019. Average balances are calculated based on month-end balances of the loans for the
period reported and are included in the table below based on its period end allowance position.

Recorded
investment

Unpaid
principal
balance

2021

Related
specific
allowance

(dollars in thousands)

Average
recorded
investment

Interest
Income
Recognized

$

3,720
3,720
45
9,365
5,200
4,165
40,591
14,677
24,581
1,333
446
388
58
54,167

327
327
—
—
—
—
686
421
—
265
—
—

—

10,303
10,303
53
11,294
6,337
4,957
41,525
14,677
25,310
1,538
485
422
63
63,660

349
349
—
—
—
—
711
446
—
265
—
—

—

1,013

1,060

$

55,180

$

64,720

$

$

$

9,240
9,240
53
10,315
5,674
4,641
26,235
1,223
22,668
2,344
479
425
54
46,322

84
84
—
—
—
—
665
444
—
221
—
—

—

749

389
389
—
375
279
96
119
—
28
91
15
15
—
898

—
—
—
—
—
—
—
—
—
—
—
—

—

—

$

47,071

$

898

307
307
—
—
—
—
88
88
—
—
—
—

—

395

395

With no related specific allowance recorded:

Commercial, financial, agricultural and
other

$

Time and demand

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer other

Subtotal

With a specific allowance recorded:

Commercial, financial, agricultural and
other

Time and demand

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer other

Subtotal

Total

80

With no related specific allowance recorded:

Commercial, financial, agricultural and
other

$

Time and demand

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home equity

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer other

Subtotal

With a specific allowance recorded:

Commercial, financial, agricultural and
other

Time and demand

Real estate construction

Residential real estate

Residential first lien

Residential junior lien/home equity

Recorded
investment

Unpaid
principal
balance

2020

Related
specific
allowance

(dollars in thousands)

Average
recorded
investment

Interest
Income
Recognized

$

2,025
2,025
54
10,939
6,062
4,877
20,650
1
16,786
3,863
418
405
13
34,086

4,210
4,210
—
—
—
—
15,757
459
15,060
238
—
—

—

19,967

2,725
2,725
53
13,258
7,575
5,683
23,641
82
19,459
4,100
447
430
17
40,124

9,377
9,377
—
—
—
—
15,830
470
15,122
238
—
—

—

25,207

$

$

6,371
6,371
146
11,913
6,605
5,308
22,287
1
18,536
3,750
470
447
23
41,187

1,544
1,544
—
—
—
—
7,997
395
7,363
239
—
—

—

9,541

1,268
1,268
—
—
—
—
3,638
116
3,508
14
—
—

—

4,906

80
80
14
335
241
94
184
—
82
102
13
13
—
626

3
3
—
—
—
—
10
—
—
10
—
—

—

13

$

54,053

$

65,331

$

4,906

$

50,728

$

639

Commercial real estate

Multifamily

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer other

Subtotal

Total

81

With no related specific allowance recorded:

Commercial, financial, agricultural and other

$

2,411

$

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Subtotal

With a specific allowance recorded:

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate
Loans to individuals

Subtotal

Total

2019

Originated

Acquired

Average
recorded
investment

Interest
Income
Recognized

Average
recorded
investment

Interest
Income
Recognized

(dollars in thousands)

—

10,819

7,455

371

21,056

4,110

—

241

1,747

—

6,098

66

—

365

156

17

604

77

—

—

3

—

80

$

2,479

$

—

1,986

747

13

5,225

—

—

—

—

—

—

—

—

8

18

—

26

—

—

—

—

—

—

26

$

27,154

$

684

$

5,225

$

Unfunded commitments related to nonperforming loans were $0.2 million at both December 31, 2021 and 2020. After
considering the collateral related to these commitments, there was no reserve established as of December 31, 2021. A reserve of
$26 thousand was held for these off balance sheet exposures at December 31, 2020.

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 alternate financing sources. Troubled debt restructured loans are considered to be nonperforming loans.

82

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 national
emergency. These modifications typically provide for the deferral of both principal and interest for 90 days. The CARES Act,
along with a joint agency statement issued by banking regulators, provides that short-term modifications, meeting certain
criteria and in response to COVID-19, do not need to be accounted for as a troubled debt restructured loans. Additionally, short-
term loan modifications that are not accounted for as a troubled debt restructured loan, in accordance with the CARES Act,
would remain classified as current during the deferral period and therefore are not reflected in the past due loan tables provided
on the prior page. As of December 31, 2021, loans with an aggregate balance $6.2 million were in a forbearance period granted
under the CARES Act.

The following table provides detail as to the total troubled debt restructured loans and total commitments outstanding on
troubled debt restructured loans as of December 31:

Troubled debt restructured loans

Accrual status

Nonaccrual status

Total

Commitments

Letters of credit

Unused lines of credit

Total

2021

2020

2019

(dollars in thousands)

$

$

$

$

7,120

13,134

20,254

60

16

76

$

$

$

$

8,512

14,740

23,252

60

11

71

$

$

$

$

7,542

6,037

13,579

60

163

223

The following tables provide detail, including specific reserve and reasons for modification, related to loans identified as
troubled debt restructurings during the years ending December 31:

Type of Modification

2021

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)

$

— $

— $

7,893

$

7,893

$

—

—

—

—

—

—

—

—

$

$

— $

— $

—

359

359

—

—

—

—

110

110

469

$

$

7,893

7,893

301

171

130

644

644

—

63

63

660

530

130

644

644

—

173

173

8,901

$

9,370

$

$

6

6

15

12

3

2

2

—

7

7

30

288

288

624

502

122

634

634

—

144

144

1,690

$

$

$

—

—

—

—

—

—

—

—

—

—

—

Commercial, financial,
agricultural and other

Time and demand

Residential real estate

Residential first lien

Residential junior lien/
home equity

Commercial real estate

Nonowner occupied

Owner occupied

Loans to individuals

Automobile

Total

83

636

636

—

—

—

—

—

—

—

—

636

—

—

—

—

—

Type of Modification

2020

Number
of
Contracts

Extend
Maturity

Modify
Rate

Modify
Payments

Total
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Specific
Reserve

Commercial, financial,
agricultural and other
Time and demand
Residential real estate

Residential first lien

Residential junior lien/
home equity

Commercial real estate

Nonowner occupied

Owner occupied
Loans to individuals

Automobile

Total

4

4

18

9

9

5

4

1

14

14

41

$

— $

—

—

—

—

—

—

—

—

$

$

— $

— $

(dollars in thousands)

$

2,176

$

2,805

$

2,196

$

2,176

2,805

2,196

917

513

404

10,857

10,289

568

148

148

14,098

$

$

950

546

404

10,857

10,289

568

262

262

791

411

380

10,758

10,263

495

224

224

14,874

$

13,969

$

$

629

629

33

33

—

—

—

—

114

114

776

$

$

Type of Modification

2019

Number
of
Contracts

Extend
Maturity

Modify
Rate

Modify
Payments

Total
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Specific
Reserve

(dollars in thousands)

Commercial, financial,
agricultural and other

Residential real estate

Commercial real estate

Loans to individuals

Total

2

20

5

11

38

$

$

— $

— $

204

556

—

156

965

6,261

143

$

156

$

154

$

1,186

6,817

143

1,059

594

121

$

760

$

7,525

$

8,302

$

1,928

$

17

—

—

17

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier
in this footnote. Loans defined as modified due to a change in rate 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 years ended December 31, 2021, 2020 and 2019,
$0.4 million, $0.8 million and $0.8 million, respectively, of total rate modifications represent loans with modifications to the
rate as well as payment due to re-amortization. In 2021 and 2019, the change between the pre-modification and post-
modification balance for commercial real estate loans is primarily due to the payoff of one large commercial relationship that
restructured during the year. For 2020, the changes in loan balances between the pre-modification balance and post-
modification balance are due to customer payments.

84

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 year ending December 31:

2021

2020

2019

Number of
Contracts

Recorded
Investment

Number of
Contracts

Recorded
Investment

Number of
Contracts

Recorded
Investment

Commercial, financial, agricultural
and other

Time and demand

Residential real estate

Residential junior lien/home equity

Loans to individuals

Automobile

Total

$

1

1

— $

—

1

1

2

223

223

—

—

21

21

(dollars in thousands)

— $

—

1

1

2

2

3

—

—

34

34

74

74

— $

—

—

—

—

—

—

$

244

$

108

— $

The following tables provide detail related to the allowance for credit losses for the years ended December 31.

2021

Beginning
balance

Charge-offs

Recoveries

(dollars in thousands)

Provision
(credit)a

Ending balance

Commercial, financial, agricultural and other

$

17,187

$

(7,020) $

2,430

$

5,496

$

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first liens

Residential junior liens/home equity

Commercial real estate

Multifamily

Nownowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

16,838

349

7,966

14,358

7,919

6,439

41,953

6,240

28,414

7,299

19,845

16,133

635

3,077

(6,845)

2,412

(175)

(9)

(309)

(60)

(249)

(1,659)

(1)

(1,556)

(102)

(4,061)

(1,792)

(425)

(1,844)

18

155

468

337

131

135

—

125

10

1,460

1,016

71

373

5,441

55

(3,892)

(1,892)

(737)

(1,155)

(7,053)

(2,678)

(2,145)

(2,230)

6,964

6,035

215

714

$

101,309

$

(13,058) $

4,648

$

(377) $

18,093

17,846

247

4,220

12,625

7,459

5,166

33,376

3,561

24,838

4,977

24,208

21,392

496

2,320

92,522

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

85

December 31, 2021

Ending balance:
individually
evaluated for
credit losses

Ending balance:
collectively
evaluated for
credit losses

Ending balance

Ending balance

(dollars in thousands)

Loans

Ending balance:
individually
evaluated for
credit losses

Ending balance:
collectively
evaluated for
credit losses

Commercial, financial,
agricultural and other

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first liens

Residential junior liens/
home equity

Commercial real estate

Multifamily

Nownowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

$

18,093

$

17,846

247

4,220

12,625

7,459

5,166

33,376

3,561

24,838

4,977

24,208

21,392

496

2,320

307

307

—

—

—

—

—

88

88

—

—

—

—

—

—

$

17,786

$

1,173,452

$

3,032

$

1,170,420

17,539

247

4,220

12,625

7,459

5,166

33,288

3,473

24,838

4,977

24,208

21,392

496

2,320

1,159,524

13,928

494,456

1,920,250

1,299,534

620,716

2,251,097

385,432

1,465,247

400,418

999,975

901,280

11,151

87,544

3,032

1,156,492

—

—

253

—

253

40,246

15,097

24,205

944

—

—

—

—

13,928

494,456

1,919,997

1,299,534

620,463

2,210,851

370,335

1,441,042

399,474

999,975

901,280

11,151

87,544

Total

$

92,522

$

395

$

92,127

$

6,839,230

$

43,531

$

6,795,699

2020

Beginning
balance

Impact of
adoption of
CECL

Charge-offs

Recoveries

(dollars in thousands)

Provision
(credit)a

Ending
balance

Commercial, financial, agricultural
and other

$

20,234

$

1,478

$

(6,318) $

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first liens

Residential junior liens/home equity

Commercial real estate

Multifamily

Nownowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

—

—

2,558

4,093

—

—

19,768

—

—

—

4,984

—

—

—

21,242

(6,220)

470

562

7,276

7,326

4,043

(207)

1,647

12,317

5,597

4,284

6,106

221

2,941

(98)

—

(1,040)

(550)

(490)

(4,939)

—

(4,678)

(261)

(6,953)

(3,954)

(595)

(2,404)

314

301

13

26

414

296

118

312

—

187

125

991

745

36

210

$

1,479

$

1,515

(36)

4,820

3,615

847

2,768

27,019

4,593

20,588

1,838

16,539

13,236

973

2,330

17,187

16,838

349

7,966

14,358

7,919

6,439

41,953

6,240

28,414

7,299

19,845

16,133

635

3,077

$

51,637

$

13,393

$

(19,250) $

2,057

$

53,472

$

101,309

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

86

December 31, 2020

Ending balance:
individually
evaluated for
credit losses

Ending balance:
collectively
evaluated for
credit losses

Ending balance

Ending balance

(dollars in thousands)

Loans

Ending balance:
individually
evaluated for
credit losses

Ending balance:
collectively
evaluated for
credit losses

$

17,187

$

1,268

$

15,919

$

1,555,986

$

5,411

$

1,550,575

16,838

349

7,966

14,358

7,919

6,439

41,953

6,240

28,414

7,299

19,845

16,133

635

3,077

1,268

—

—

—

—

—

3,638

116

3,508

14

—

—

—

—

15,570

349

7,966

14,358

7,919

6,439

38,315

6,124

24,906

7,285

19,845

16,133

635

3,077

1,541,382

14,604

427,221

1,750,592

1,144,323

606,269

2,211,569

371,239

1,421,151

419,179

815,815

712,800

12,360

90,655

5,411

1,535,971

—

—

1,105

528

577

34,947

459

31,450

3,038

—

—

—

—

14,604

427,221

1,749,487

1,143,795

605,692

2,176,622

370,780

1,389,701

416,141

815,815

712,800

12,360

90,655

Commercial, financial,
agricultural and other

Time and demand

Commercial credit cards

Real estate construction

Residential real estate

Residential first liens

Residential junior liens/
home equity

Commercial real estate

Multifamily

Nownowner occupied

Owner occupied

Loans to individuals

Automobile

Consumer credit cards

Consumer other

Total

$

101,309

$

4,906

$

96,403

$

6,761,183

$

41,463

$

6,719,720

87

2019

Commercial,
financial,
agricultural
and other

Real estate
construction

Residential
real estate

Commercial
real estate

Loans to
individuals

Total

(dollars in thousands)

$

19,235

$

2,002

$

3,934

$

18,382

$

4,033

$

47,586

(2,667)

245

3,408

20,221

139

(726)

81

519

13

—

158

398

2,558

—

—

—

—

—

(986)

246

897

4,091

35

(56)

69

(46)

2

$

$

$

$

20,234

1,580

18,654

2,558

$

4,093

— $

1

$

$

(632)

189

1,792

19,731

4

(1,376)

—

1,409

37

19,768

851

(5,747)

(10,032)

611

6,087

4,984

—

(84)

15

69

—

1,449

12,582

51,585

178

(2,242)

165

1,951

52

$

$

4,984

$

51,637

— $

2,432

2,558

4,092

18,917

4,984

49,205

1,241,853

449,039

1,681,362

2,117,519

699,375

6,189,148

9,246

—

1,741

6,846

—

17,833

1,232,607

449,039

1,679,621

2,110,673

699,375

6,171,315

Allowance for credit losses:

Originated Loans:

Beginning balance

Charge-offs

Recoveries

Provision (credit)

Ending balance

Acquired Loans:

Beginning balance

Charge-offs

Recoveries

Provision (credit)

Ending balance

Total ending balance

Ending balance: individually evaluated
for impairment

Ending balance: collectively evaluated
for impairment

Loans:

Ending balance

Ending balance: individually evaluated
for impairment

Ending balance: collectively evaluated
for impairment

Note 9—Commitments and Letters of Credit

First Commonwealth is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the
financial needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and
commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the Consolidated Statements of Financial Condition. First Commonwealth’s exposure to credit loss in
the event of nonperformance by the other party of the financial instrument for commitments to extend credit, standby letters of
credit and commercial letters of credit is represented by the contract or notional amount of those instruments. First
Commonwealth uses the same credit policies for underwriting all loans, including these commitments and conditional
obligations.

As of December 31, 2021 and 2020, First Commonwealth did not own or trade other financial instruments with significant off-
balance sheet risk including derivatives such as futures, forwards, option contracts and the like, although such instruments may
be appropriate to use in the future to manage interest rate risk. See Note 6, “Derivatives,” for a description of interest rate
derivatives entered into by First Commonwealth.

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 for 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.

88

The following table identifies the notional amount of those instruments at December 31:

Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit
Financial standby letters of credit
Performance standby letters of credit
Commercial letters of credit

2021

2020

(dollars in thousands)

$

$

2,353,991
18,824
10,663
975

2,097,628
15,988
16,864
783

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a
fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. First Commonwealth evaluates each customer’s creditworthiness on a case-by-
case basis. The amount of collateral obtained, if deemed necessary by First Commonwealth upon extension of credit, is based
on management’s credit evaluation of the counterparty. Collateral that is held varies but may include accounts receivable,
inventory, property, plant and equipment, and residential and income-producing commercial properties.

The notional amounts outstanding at December 31, 2021 include amounts issued in 2021 of $0.3 million in financial standby
letters of credit and $2.7 million in performance standby letters of credit. There were no commercial letters of credit issued
during 2021. A liability of $0.1 million has been recorded as of December 31, 2021 and 2020, which represents the estimated
fair value of letters of credit issued. The fair value of letters of credit is estimated based on the unrecognized portion of fees
received at the time the commitment was issued.

Unused commitments and letters of credit provide exposure to future credit loss in the event of nonperformance by the
borrower or guaranteed parties. Management’s evaluation of the credit risk in these commitments resulted in the recording of a
liability of $6.4 million and $7.4 million as of December 31, 2021 and 2020, respectively. This liability is reflected in “Other
liabilities” in the 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.

Note 10—Premises, Equipment and Lease Commitments

Premises and Equipment

Premises and equipment are described as follows:

Land

Buildings and improvements

Operating lease right of use asset

Leasehold improvements

Furniture and equipment

Software

Subtotal

Less accumulated depreciation and amortization

Total premises and equipment, net

Estimated Useful
Life

2021

2020

(dollars in thousands)

Indefinite $

14,621

$

10-50 years

1-25 years

5-40 years

3-7 years

3-7 years

75,149

47,938

35,909

73,976

43,511

291,104

170,329

$

120,775

$

15,441

77,003

48,642

35,347

73,150

41,681

291,264

165,747

125,517

Depreciation related to premises and equipment included in noninterest expense for the years ended December 31, 2021, 2020
and 2019 amounted to $9.9 million, $10.9 million and $10.5 million, respectively. Amortization of lease right-of-use assets
totaled $1.4 million in 2021 and $2.6 million in 2020.

At December 31, 2021 and December 31, 2020, $1.9 million and $2.6 million, respectively, in premise and equipment assets
were considered available for sale as a result of the 2020 branch consolidation initiative.

89

Lease Commitments

First Commonwealth has elected to apply certain practical expedients under ASU 2016-02 "Leases" (Topic 842), including (i)
to not apply the requirements in the new standard to short-term leases (ii) to not reassess the lease classification for any expired
or existing lease (iii) to account for lease and non-lease components separately (iv) to not reassess initial direct costs for any
existing leases. The impact of this standard primarily relates to operating leases of certain real estate properties, primarily
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.

The following table represents the lease costs and other lease information for the years ended December 31.

Balance sheet:

Operating lease asset classified as premises and equipment

Operating lease liability classified as other liabilities

Income statement:

Operating lease cost classified as occupancy and equipment
expense

Weighted average lease term, in years
Weighted average discount rate

Operating cash flows

$

$

$

2021

2020

(dollars in thousands)

40,550

44,801

4,806

14.11
3.24 %

4,753

$

$

$

42,617

46,819

5,930

14.83
3.42 %

5,979

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.

The following table reconciles future minimum lease payments due under non-cancelable operating leases (those amounts
subject to recognition) to the lease liability as of December 31, 2021 (dollars in thousands):

For the twelve months ended December 31,

2022

2023

2024

2025

2026

Thereafter

Total future minimum lease payments

Less remaining imputed interest

Operating lease liability

$

$

4,667

4,622

4,481

4,261

3,844

35,207

57,082

12,281

44,801

Rent expense, net of rental income, for all operating leases totaled $4.5 million in 2021, $6.7 million in 2020 and $4.9 million
in 2019. Rent expense includes amounts related to items that are not included in the determination of lease right-of-use assets
including expenses related to short-term leases and non-lease components such as taxes, insurance, and common area
maintenance costs.

Note 11—Goodwill and Other Intangible Assets

FASB ASC Topic 350-20, “Intangibles—Goodwill and Other" ("Topic 350"), 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

90

goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that
it is more likely than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not
that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be
performed.

We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill as of December 31, 2021 and
2020 was $303.3 million. No impairment charges on goodwill or other intangible assets were incurred in 2021, 2020 or 2019.

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 December 31, 2021, goodwill was not considered impaired; 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.

Topic 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is
obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged,
regardless of the acquirer’s intent to do so.

The following table summarizes other intangible assets:

December 31, 2021

Customer deposit intangibles

Customer list intangible

Total other intangible assets

December 31, 2020

Customer deposit intangibles

Customer list intangible

Total other intangible assets

Gross
Intangible
Assets

Accumulated
Amortization

(dollars in thousands)

Net
Intangible
Assets

$

$

$

$

22,573

2,283

24,856

22,573

2,283

24,856

$

$

$

$

(14,407) $

(1,762)

(16,169) $

8,166

521

8,687

(11,653) $

10,920

(1,570)

713

(13,223) $

11,633

Core deposits are amortized over their expected lives using the present value of the benefit of the core deposits and straight-line
methods of amortization. The core deposits have a remaining amortization period of 7.7 years and a weighted average
amortization period of approximately 6.2 years. The customer list intangible represents the estimated value of the customer
base for an insurance agency acquired in 2014 and the wealth management business acquired as part of the DCB acquisition in
2017. These amounts are amortized over their expected lives using expected cash flows based on retention of the customer
base. The customer list intangible has a remaining amortization period of 7.7 years and a weighted average amortization period
of 5.9 years. First Commonwealth recognized amortization expense on other intangible assets of $2.9 million, $3.4 million, and
$3.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

In addition to customer deposit intangibles and customer list intangibles, First Commonwealth has servicing rights on mortgage
loans as well as certain commercial loans totaling $2.5 million and $1.9 million as of December 31, 2021 and 2020,
respectively. These servicing rights relate to loans sold to third parties on which the Company retains servicing responsibilities.
The Company recognized amortization expense on these servicing assets of $0.6 million and $0.3 million for the years ended
December 31, 2021 and 2020, respectively.

91

The following presents the estimated amortization expense of core deposit and customer list intangibles:

2022

2023

2024

2025

2026

Thereafter

Total

Core Deposit
Intangibles

Customer List
Intangible

Total

(dollars in thousands)

$

$

2,343 $

1,932

1,522

1,112

702

555

159 $

128

97

69

42

26

8,166 $

521 $

2,502

2,060

1,619

1,181

744

581

8,687

looks Note 12—Interest-Bearing Deposits

Components of interest-bearing deposits at December 31 were as follows:

Interest-bearing demand deposits

Savings deposits

Time deposits

Total interest-bearing deposits

2021

2020

(dollars in thousands)

$

291,476

$

250,353

4,647,197

385,043

4,305,391

562,964

$

5,323,716

$

5,118,708

Interest-bearing deposits at both December 31, 2021 and 2020 include allocations from interest-bearing demand deposit
accounts of $1.2 billion into savings, which includes money market accounts. These allocations are based on a formula and
were made to reduce First Commonwealth’s reserve requirement in compliance with regulatory guidelines. Deposits totaling
$0.6 million and $0.7 million at December 31, 2021 and 2020, respectively, were reclassified from deposits to loans due to their
overdrawn status.

Included in time deposits at December 31, 2021 and 2020 were certificates of deposit in denominations of $250 thousand or
more of $51.7 million and $93.1 million, respectively.

Interest expense related to certificates of deposit in denominations of $250 thousand or greater amounted to $0.4 million in
2021, $2.0 million in 2020 and $3.3 million in 2019.

Included in time deposits at December 31, 2021, were certificates of deposit with the following scheduled maturities (dollars in
thousands):

$

276,014

50,607

25,370

12,814

20,238

$

385,043

2022

2023

2024

2025

2026 and thereafter

Total

92

Note 13—Short-term Borrowings

Short-term borrowings at December 31 were as follows:

Ending
Balance

2021

Average
Balance

Average
Rate

Ending
Balance

2020

Average
Balance

Average
Rate

Ending
Balance

2019

Average
Balance

Average
Rate

Federal funds purchased

$

— $

Borrowings from FHLB

—

—

—

Securities sold under
agreements to repurchase

Total

$ 138,315

$ 119,801

138,315

119,801

—

0.08

0.08

(dollars in thousands)

— % $

— $

4,147

1.06 % $

— $

8,069

—

28,252

1.54

136,200

278,930

2.53 %

2.62

117,373

110,235

$ 117,373

$ 142,634

0.21

0.49

65,653

104,548

$ 201,853

$ 391,547

0.75

2.12

Maximum total at any
month-end

Weighted average rate at
year-end

$ 138,315

$ 248,471

$ 670,831

0.06 %

0.10 %

1.41 %

Interest expense on short-term borrowings for the years ended December 31 is detailed below:

Federal funds purchased

Borrowings from FHLB

Securities sold under agreements to repurchase

Total interest on short-term borrowings

Note 14—Subordinated Debentures

Subordinated debentures outstanding at December 31 are as follows:

2021

2020

2019

(dollars in thousands)

— $

44

$

—

99

99

$

434

226

704

$

204

7,313

781

8,298

$

$

Due

Rate

2021

Amount

2020

Amount

(dollars in thousands)

Owed to:

First Commonwealth Bank

06/01/2028

4.875% until June 1, 2023,
then 3-Month LIBOR + 1.845% $

49,407

$

49,314

First Commonwealth Bank

First Commonwealth Capital Trust II

06/01/2033

01/23/2034

First Commonwealth Capital Trust III

04/06/2034

Total

5.50% until June 1, 2028,
then 3-Month LIBOR +2.37%

3-Month LIBOR + 2.85%

3-Month LIBOR + 2.85%

49,201

30,929

41,238

49,131

30,929

41,238

$

170,775

$

170,612

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

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

93

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

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

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

Note 15—Other Long-term Debt

Other long-term debt at December 31 follows:

Borrowings from FHLB due:

2021

2022

2023

2024

2025

2026

Thereafter

Total

2021

2020

Weighted
Average
Contractual
Rate

Amount

Amount

Weighted
Average
Contractual
Rate

(dollars in thousands)

$

50,685

2.32 %

$

$

712

739

769

799

830

1,724

5,573

3.85 %

3.86

3.86

3.86

3.87

3.68

712

739

769

799

2,554

56,258

$

3.85

3.86

3.86

3.86

3.74

The weighted average contractual rate reflects the rate due to creditors. The weighted average effective rate of long-term debt is
equal to the weighted average contractual rate.

All of First Commonwealth’s Federal Home Loan Bank stock, along with an interest in mortgage loans and residential
mortgage backed securities, has been pledged as collateral with the Federal Home Loan Bank of Pittsburgh.

Capital securities included in total long-term debt on the Consolidated Statements of Financial Condition are excluded from the
above, but are described in Note 14, “Subordinated Debentures.”

Note 16—Fair Values of Assets and Liabilities

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

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

94

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 defined in Note 1, "Statement of Accounting Policies."

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 include FHLB stock whose estimated fair value is based on its par value. Additional information on FHLB
stock is provided in Note 7, “Investment Securities.”

Loans held for sale include residential mortgage loans originated for sale in the secondary mortgage market. The estimated fair
value for these loans was determined on the basis of rates obtained in the respective secondary market. Loans held for sale
could also include the Small Business Administration guaranteed portion of small business loans. The estimated fair value of
these loans is based on the contract with the third party investor.

During the third quarter of 2020, the company announced the consolidation of 29 branch locations into nearby offices prior to
December 31, 2020. As a result, 17 owned locations were moved to held for sale and are being carried at the lower of cost or
fair value. At December 31, 2021, three locations were remaining in held for sale, all of which were being carried at cost. At
December 31, 2020, four of these locations were carried at fair value, determined by an independent market-based appraisal less
estimated costs to sell, and are classified as Level 2.

Interest rate derivatives are reported at estimated fair value utilizing Level 2 inputs and are included in "Other assets" and
"Other liabilities" in the Consolidated Statements of Financial Condition. These consist of interest rate swaps where there is no
significant deterioration in the counterparties' (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 years. These yield curves determine the valuations of interest rate
swaps. Interest rate derivatives are further described in Note 6, “Derivatives.”

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

We also utilize this approach to estimate our own credit risk on derivative liability positions. In 2021 and 2020, we have not
realized any losses due to a counterparty's inability to pay any net uncollateralized position.

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

In addition, the Company hedges foreign currency risk through the use of foreign exchange forward contracts. The fair value of
foreign exchange forward contracts is based on the differential between the contract price and the market-based forward rate.

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

95

The estimated fair value of the 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 credit quality of the underlying counterparties (loan customers).

In accordance with ASU 2011-4, the following table provides information related to quantitative inputs and assumptions used in
Level 3 fair value measurements.

December 31, 2021

Other Investments

Nonperforming Loans

Fair Value
(dollars in
thousands)

Valuation Technique

Unobservable Inputs

Range / (weighted
average)

$

1,170

Carrying Value

N/A

598 (a)

Gas Reserve Study

Discount rate

N/A

10.00%

Gas per MMBTU

$2.00 - $2.00 (b)

Oil per BBL/d

$50.00 - $50.00 (b)

Limited Partnership Investments

14,981

Par Value

N/A

N/A

N/A

N/A

10.00%

December 31, 2020

Other Investments

Nonperforming Loans

1,670

Carrying Value

798 (a)

Gas Reserve study

Discount rate

Limited Partnership Investments

6,619

Par Value

N/A

N/A

Gas per MMBTU

$1.46 - $1.48 (b)

Oil per BBL/d

$36.00 - $36.00 (b)

(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.

96

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis at December 31:

2021

Level 1

Level 2

Level 3

Total

(dollars in thousands)

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential

$

— $

5,662

$

— $

Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential

Other Government-Sponsored Enterprises

Obligations of States and Political Subdivisions

Corporate Securities

Total Securities Available for Sale

Other Investments

Loans Held for Sale

Other Assets (a)

Total Assets

Other Liabilities (a)

Total Liabilities

—

—

—

—

—

—

—

—

—

362,290

629,974

981

9,524

32,949

1,041,380

11,668

18,583

26,805

—

—

—

—

—

—

1,170

—

14,981

5,662

362,290

629,974

981

9,524

32,949

1,041,380

12,838

18,583

41,786

$

$

$

— $

— $

— $

1,098,436

34,263

34,263

$

$

$

16,151

$

1,114,587

— $

— $

34,263

34,263

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

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential
Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential
Other Government-Sponsored Enterprises
Obligations of States and Political Subdivisions
Corporate Securities

Total Securities Available for Sale

Other Investments
Loans Held for Sale
Premises and Equipment
Other Assets (a)

Total Assets

Other Liabilities (a)

Total Liabilities

2020

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

$
$
$

— $
—

—
—
—
—
—
—
—
—
—
— $
— $
— $

7,230
191,180

$

— $
—

7,230
191,180

496,033
100,998
11,397
24,385
831,223
10,557
33,436
442
54,362
930,020
61,308
61,308

$
$
$

—
—
—
—
—
1,670
—
—
6,619
8,289

$
— $
— $

496,033
100,998
11,397
24,385
831,223
12,227
33,436
442
60,981
938,309
61,308
61,308

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

97

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows for the year
ended December 31, 2021:

Balance, beginning of year

Total gains or losses

Included in earnings

Included in other comprehensive income

Purchases, issuances, sales, and settlements

Purchases

Issuances

Sales

Settlements

Transfers from Level 3

Transfers into Level 3

Balance, end of year

Other Investments

Other Assets

Total

(dollars in thousands)

$

1,670

$

6,619

$

8,289

—

—

—

—

—

(500)

—

—

—

—

8,511

—

—

(149)

—

—

—

—

8,511

—

—

(649)

—

—

$

1,170

$

14,981

$

16,151

There are no gains or losses included in earnings for the period that are attributable to the change in realized gains (losses)
relating to assets held at December 31, 2021.

During the year ended December 31, 2021, there were no transfers between fair value Levels 1, 2 or 3.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows for the year
ended December 31, 2020:

Balance, beginning of year

Total gains or losses

Included in earnings

Included in other comprehensive income

Purchases, issuances, sales, and settlements

Purchases

Issuances

Sales

Settlements

Transfers from Level 3

Transfers into Level 3

Balance, end of year

Other Investments

Other Assets

Total

(dollars in thousands)

$

1,670

$

5,795

$

7,465

—

—

—
—

—

—

—

—

—

—

824
—

—

—

—

—

—

—

824
—

—

—

—

—

$

1,670

$

6,619

$

8,289

There are no gains or losses included in earnings for the period that are attributable to the change in realized gains (losses)
relating to assets held at December 31, 2020.

During the year ended December 31, 2020, there were no transfers between fair value Levels 1, 2 or 3.

98

The tables below present the balances of assets measured at fair value on a nonrecurring basis at December 31 and total gains
and losses realized on these assets during the year ended December 31:

Nonperforming loans

Other real estate owned

Total Assets

Nonperforming loans

Other real estate owned

Total Assets

2021

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

$

$

$

— $

42,538

—

729

— $

43,267

$

$

12,247

—

12,247

2020

Level 1

Level 2

Level 3

(dollars in thousands)

— $

—

— $

35,543

1,319

36,862

$

$

13,604

—

13,604

$

$

$

$

54,785

729

55,514

Total

49,147

1,319

50,466

$

$

$

$

Total
Gains
(Losses)

352

—

352

Total
Gains
(Losses)

(7,905)

(30)

(7,935)

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

The fair value for other real estate owned, 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 had a current carrying value of $0.6 million as of December
31, 2021 and consisted primarily of commercial real estate properties in Pennsylvania. We review whether events and
circumstances subsequent to a transfer to other real estate owned have occurred that indicate the balance of those assets may not
be recoverable. If events and circumstances indicate further impairment, we will record a charge to the extent that the carrying
value of the assets exceed their fair values, less estimated costs 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 this measurement is provided in Note 11
“Goodwill and Other Amortizing Intangible Assets.” There were no other assets or liabilities measured at fair value on a
nonrecurring basis during 2021.

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 available for sale and held to maturity securities 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, is considered a reasonable estimate of fair value.

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

99

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.

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 December 31, 2021 and 2020.
See Note 9, “Commitments and Letters of Credit,” 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 the fair value 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 types of borrowings. The carrying amounts of other short-term borrowings, such as federal funds
purchased and securities sold under agreement to repurchase, were used to approximate fair value due to the short-term nature
of the borrowings.

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

100

The following table presents carrying amounts and estimated fair values of First Commonwealth’s financial instruments at
December 31:

2021

Fair Value Measurements Using:

Carrying
Amount

Total

Level 1

Level 2

Level 3

(dollars in thousands)

$

84,738

$

84,738

$

84,738

$

310,634

1,041,380

541,311

12,838

18,583

310,634

1,041,380

536,651

12,838

18,583

6,839,230

7,169,768

7,982,498

7,980,101

138,315

5,573

170,775

5,921

136,473

6,065

175,040

5,921

310,634

—

—

—

—

—

—

—

—

—

—

— $

—

1,041,380

536,651

11,668

18,583

42,538

7,980,101

136,473

6,065

—

5,921

—

—

—

—

1,170

—

7,127,230

—

—

—

175,040

—

2020

Fair Value Measurements Using:

Carrying
Amount

Total

Level 1

Level 2

Level 3

(dollars in thousands)

$

100,009

$

100,009

$

100,009

$

256,572

831,223

361,844

12,227

33,436
6,761,183

256,572

831,223

369,851

12,227

33,436
7,202,763

7,438,666

7,440,906

117,373

56,258

170,612

6,385

117,037

57,881

165,665

6,385

256,572

—

—

—

—
—

—

—

—

—

—

— $

—

831,223

369,851

10,557

33,436
35,543

7,440,906

117,037

57,881

—

6,385

—

—

—

—

1,670

—
7,167,220

—

—

—

165,665

—

Financial assets

Cash and due from banks

Interest-bearing deposits

Securities available for sale

Securities held to maturity

Other investments

Loans held for sale

Loans

Financial liabilities

Deposits
Short-term borrowings

Long-term debt

Subordinated debt

Capital lease obligation

Financial assets

Cash and due from banks

Interest-bearing deposits

Securities available for sale

Securities held to maturity

Other investments

Loans held for sale

Loans

Financial liabilities

Deposits

Short-term borrowings

Long-term debt

Subordinated debt

Capital lease obligation

101

Note 17—Income Taxes

The income tax provision for the years ended December 31 is as follows:

Current tax provision:

Federal

State

Total current tax provision

Deferred tax provision (benefit):

Federal

State

Total deferred tax provision

Total tax provision

2021

2020

2019

(dollars in thousands)

$

32,586

$

21,629

$

22,942

397

32,983

1,501

76

1,577

329

21,958

(5,070)

(132)

(5,202)

$

34,560

$

16,756

$

282

23,224

2,284

8

2,292

25,516

The statutory to effective tax rate reconciliation for the years ended December 31 is as follows:

2021

2020

2019

Amount

% of
Pretax
Income

Amount

% of
Pretax
Income

(dollars in thousands)

Amount

% of
Pretax
Income

Tax at statutory rate

$

36,292

21 % $

18,943

21 % $

27,478

21 %

Increase (decrease) resulting from:

State income tax, net of federal
benefit
Income from bank owned life
insurance
Tax-exempt interest income, net

Tax credits

Other

326

(1,351)

(846)

(127)

266

—

(1)

—

—

—

155

(1,376)

(1,117)

(44)

195

—

(1)

(1)

—

—

229

(1,260)

(1,298)

(7)

374

—

(1)

(1)

—

—

Total tax provision

$

34,560

20 % $

16,756

19 % $

25,516

19 %

The total tax provision for financial reporting differs from the amount computed by applying the statutory federal income tax
rate to income before taxes. First Commonwealth ordinarily generates 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. The consistent level of tax benefits that reduce First Commonwealth’s tax rate
below the statutory rate produced an annual effective tax rate of 20% for the year ended December 31, 2021 and 19% for each
of the years ended December 31, 2020 and 2019.

102

The tax effects of temporary differences between the financial statement carrying amounts and the tax bases of assets and
liabilities that represent significant portions of the deferred tax assets and liabilities at December 31 are presented below:

Deferred tax assets:

Lease liability

Allowance for credit losses

Postretirement benefits other than pensions

Unrealized loss on securities available for sale

Net operating loss carryforward

Deferred compensation

Accrued interest on nonaccrual loans

Accrued incentives

Unfunded loan commitments & other reserves

Other

Total deferred tax assets

Deferred tax liabilities:

Loan origination fees and costs

Right of use asset

Unrealized gain on securities available for sale

Depreciation of assets

Section 197 intangibles

Other

Total deferred tax liabilities

Net deferred tax asset

2021

2020

(dollars in thousands)

$

9,489

$

19,597

235

2,357

75

1,969

779

2,591

1,363

988

9,928

21,483

242

—

385

1,723

644

2,182

1,576

1,831

39,443

39,994

(253)

(8,589)

—

(1,725)

(1,107)

(308)

(11,982)

$

27,461

$

(1,280)

(9,037)

(4,629)

(2,103)

(540)

(424)

(18,013)

21,981

The Company has approximately $1.0 million of federal net operating losses which are subject to an annual limitation under
IRC Section 382. The Company has approximately $1.0 million of Pennsylvania net operating losses which begin to expire in
2034 and the Company expects to fully utilize the losses prior to expiration.

Management assesses all available positive and negative evidence to estimate if sufficient future taxable income will be
generated to utilize the existing deferred tax assets. Based on our evaluation, as of December 31, 2021, management has
determined that no valuation allowance is necessary for the deferred tax assets because it is more likely than not that these
assets will be realized through future reversals of existing temporary differences and future taxable income.

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” the Company has no material
unrecognized tax benefits or accrued interest and penalties as of December 31, 2021. We do not expect the total amount of
unrecognized tax benefits to significantly increase in the next twelve months. The Company records interest and penalties on
unrecognized tax benefits 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, 2018 are no longer open to
examination by federal and state taxing authorities.

Note 18—Retirement Plans

First Commonwealth has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue code. Effective
January 1, 2020, a participating employee can receive a maximum matching contribution of 4% of their eligible compensation.
In addition, each participating employee may contribute up to 80% of their eligible compensation to the plan. The 401(k) plan
expense was $3.0 million in 2021, $3.9 million in 2020, and $3.6 million in 2019.

103

First Commonwealth maintains a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to provide deferred
compensation for those employees who are in the top 7% of full-time employees, as determined on the basis of eligible
compensation. The NQDC Plan provides participants whose maximum retirement contribution is limited by IRS rules to defer
additional compensation.

Participants in the NQDC Plan are eligible to defer (on a pre-tax basis) from 1% to 25% of their eligible Plan compensation.
Participants are also eligible to defer all or a portion of the Annual Incentive Plan (on a pre-tax basis) from 10% to 100% of
their annual cash incentive earned. There was no NQDC Plan expense in 2021, 2020 and 2019.

Select employees from former acquisitions were covered by postretirement benefit plans which provide medical and life
insurance coverage. The measurement date for these plans was December 31.

Postretirement Benefits Other than Pensions from Prior Acquisitions

Net periodic benefit cost of these plans for the years ended December 31, was as follows:

Service cost

Interest cost on projected benefit obligation

Amortization of transition obligation

Amortization of prior service cost

Gain amortization

Net periodic benefit cost

2021

2020

2019

(dollars in thousands)

— $

— $

23

—
76

(27)

72

$

23

—
—

(52)

(29) $

—

34

—
—

(60)

(26)

$

$

The following table sets forth the change in the benefit obligation and plan assets as of December 31:

2021

2020

(dollars in thousands)

Change in Benefit Obligation

Benefit obligation at beginning of year

$

1,372

$

Service cost

Interest cost

Amendments

Actuarial gain

Net benefits paid

Benefit obligation at end of year

Change in Plan Assets

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contributions

Net benefits paid

Fair value of plan assets at end of year

Funded Status at End of Year

Unrecognized prior service cost

Unrecognized net gain

—

23

—

(302)

(107)

986

—

—

107

(107)

—

986

(461)

584

Amounts recognized in retained earnings

$

1,109

$

As of December 31, the funded status of the plan is:

834

—

23

537

102

(124)

1,372

—

—

124

(124)

—

1,372

(537)

308

1,143

Amounts Recognized in the Statement of Financial Condition as Other liabilities

$

986

$

1,372

2021

2020

(dollars in thousands)

104

The following table sets forth the amounts recognized in accumulated other comprehensive income that have not yet been
recognized as components of net periodic benefit costs as of December 31:

Amounts recognized in accumulated other comprehensive income, net of
tax:

Net (gain) loss

Prior service cost

Total

2021

2020

2019

(dollars in thousands)

$

$

(461) $

364

(97) $

(243) $

424

181

$

(366)

—

(366)

Weighted-average assumptions used to determine the benefit obligation as of December 31 are as follows:

Weighted-Average Assumptions

Discount rate

Health care cost trend: Initial

Health care cost trend: Ultimate

Year ultimate reached

2021

2020

2019

2.38 %

5.90 %

4.75 %

2027

1.83 %

5.95 %

4.75 %

2026

2.88 %

5.55 %

4.75 %

2025

Weighted-average assumptions used to determine the net benefit costs as of December 31 are as follows:

Weighted-Average Assumptions for Net Periodic Cost

Discount rate

Health care cost trend: Initial

Health care cost trend: Ultimate

Year ultimate reached

Corridor

Recognition period for gains and losses

2021

2020

2019

1.83 %

5.95 %

4.75 %

2026

10.00 %

10.4

2.88 %

5.55 %

4.75 %

2025

10.00 %

10.9

4.11 %

6.00 %

4.75 %

2024

10.00 %

12.1

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) introduced a prescription drug
benefit under Medicare Part D and a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription
drug benefit that is at least actuarially equivalent to Medicare Part D. The postretirement plans of First Commonwealth are
provided through insurance coverage; therefore, First Commonwealth will not receive a direct federal subsidy. The preceding
measures of the accumulated postretirement benefit cost assume that First Commonwealth will not receive the subsidy due to
the relatively small number of retirees.

As of December 31, 2021, the projected benefit payments for the next ten years are as follows:

2022

2023

2024

2025

2026

2027 - 2031

Projected Benefit
Payments

(dollars in thousands)

$

118

113

107

100

93

350

The projected payments were calculated using the same assumptions as those used to calculate the benefit obligations included
in this note.

105

The estimated costs that will be amortized from accumulated other comprehensive income into net periodic cost for 2022 are as
follows (dollars in thousands):

Net gain

Prior service cost

Total

Note 19—Incentive Compensation Plan

Postretirement
Benefits

(dollars in thousands)

$

$

(69)

76

7

On January 20, 2009, the Board of Directors of the Company adopted, with shareholder approval, the First Commonwealth
Financial Corporation Incentive Compensation Plan. This plan allows for shares of common stock to be issued to employees,
directors, and consultants of the Company and its subsidiaries as an incentive to aid in the financial success of the Company.
The shares can be issued as options, stock appreciation rights, performance share or unit awards, dividend or dividend
equivalent rights, stock awards, restricted stock awards, or other annual incentive awards. Up to 5,000,000 shares of stock can
be awarded under this plan, of which 2,434,596 shares were still eligible for awards as of December 31, 2021.

Restricted Stock

The following provides detail on the restricted stock awards which were issued and outstanding in 2021, 2020 and 2019 in
order to retain and attract key employees. The grant date fair value of the restricted stock awards is equal to the price of First
Commonwealth’s common stock on grant date.

Grant Date

December 13, 2021
December 9, 2021
November 22, 2021
November 19, 2021
September 27, 2021
June 14, 2021
February 18, 2021
February 20, 2020
February 21, 2019
February 21, 2019
November 26, 2018
May 29, 2018
March 26, 2018
February 26, 2018
March 24, 2017
March 24, 2017
December 19, 2016
September 30, 2016
September 19, 2016
June 7, 2016
March 1, 2016
March 1, 2016

Shares issued

Grant Price

Vesting Date

Number of
Equal Vesting
Periods

2,000 $
1,000
1,565
24,000
6,000
15,000
84,950
95,300
63,000
15,000
2,000
3,000
2,000
77,500
5,000
7,000
15,000
10,000
33,000
10,000
10,000
5,000

14.83 December 13, 2024
15.07 December 9, 2024
15.96 November 22, 2024
15.81 November 19, 2024
13.78 September 27, 2024
14.58 June 1, 2024
12.77 February 18, 2024
13.72 February 20, 2023
14.22 February 22, 2022
14.22 February 22, 2022
13.82 November 26, 2021
15.44 May 29, 2021
14.08 March 26, 2021
14.49 February 26, 2021
12.99 March 24, 2020
12.99 March 24, 2020
13.96 December 19, 2019
10.09 September 30, 2019
10.02 September 19, 2019
9.34 June 7, 2019
8.84 March 1, 2019
8.84 March 1, 2019

1
1
1
1
1
3
1
1
1
1
1
1
1
1
1
1
3
1
3
1
1
1

Compensation expense related to restricted stock was $3.1 million, $2.9 million and $2.7 million in 2021, 2020 and 2019,
respectively. As of December 31, 2021, there was $3.8 million of unrecognized compensation cost related to unvested restricted
stock awards granted.

A summary of the status of First Commonwealth’s unvested service-based restricted stock awards as of December 31 and
changes for the years ended on those dates is presented below:

106

Outstanding, beginning of the year
Granted
Vested
Forfeited

Outstanding, end of the year

2021

2020

2019

$

Weighted
Average
Grant Date
Fair Value
14.13
13.64
14.46
13.66
13.82

Shares
250,800
134,515
(88,389)
(10,911)
286,015

$

Weighted
Average
Grant Date
Fair Value
14.27
13.72
12.99
13.85
14.13

Shares
171,500
95,300
(12,000)
(4,000)
250,800

$

Weighted
Average
Grant Date
Fair Value
13.05
14.22
10.09
14.40
14.27

Shares
137,500
78,000
(41,000)
(3,000)
171,500

The following provides detail on restricted stock awards estimated to be granted on a performance award basis during 2021,
2020 and 2019. These plans were previously approved by the Board of Directors.

Grant Date
December 30, 2015
February 23, 2017
February 22, 2018
February 21, 2019
February 20, 2020
February 18, 2021

Target
Share
Award
60,000
93,500
102,000
121,900
125,800
143,400

Performance
Period
(years)
5
3
3
3
3
3

Award if
threshold
met

Award if
targets are
met

Award if
superior
met

Award if
threshold not
achieved

40 %
40 %
40 %
40 %
40 %

100 %
100 %
100 %
100 %
100 %

200 %
200 %
200 %
200 %
200 %

— %
— %
— %
— %
— %

Vesting After
Performance
Period (years)
0
0
0
0
0
0

Final vesting
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023

The following table summarizes the estimated unvested target share awards for the Plans as of December 31:

Outstanding, beginning of the year
Granted
Issued
Forfeited

Outstanding, end of the year

2021

2020

2019

434,180
143,400
(158,531)
(27,949)
391,100

442,832
125,800
(134,452)
—
434,180

496,603
134,929
(188,700)
—
442,832

Based on a Monte Carlo simulation, the above grants have the following fair market values per share:

Proportional Fair Value

50%

25%

25%

February 23, 2017

February 22, 2018

February 21, 2019
February 20, 2020

February 18, 2021

$

13.29

$

13.29

$

14.17

14.22
13.72

12.77

13.25

16.62
15.37

11.45

15.09

15.83

13.07
12.43

16.41

107

Note 20—Contingent Liabilities

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 December 31, 2021, management, after consultation
with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against
First Commonwealth or its subsidiaries will be material to First Commonwealth’s consolidated financial position. On at least a
quarterly basis, First Commonwealth assesses its liabilities and contingencies in connection with such legal proceedings. For
those matters where it is probable that First Commonwealth will incur losses and the amounts of the losses can be reasonably
estimated, First Commonwealth records an expense and corresponding liability in its consolidated financial statements. To the
extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not
currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the
aggregate, beyond the existing recorded liability (if any), is between $0 and $1 million. Although First Commonwealth does not
believe that the outcome of pending litigation will be material to First Commonwealth’s consolidated financial position, it
cannot rule out the possibility that such outcomes will be material to the consolidated results of operations and cash flows for a
particular reporting period in the future.

Note 21—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 Topic 606 - Revenue from Contracts with Customers. Topic 606 is applicable to noninterest
revenue streams such as trust income, service charges on deposits, insurance and retail brokerage commissions, card-related
interchange income and gain(loss) on sale of OREO. For contracts within the scope of Topic 606, the Company immediately
expenses contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been
amortized in one year or less.

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

Trust Income

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

Service Charges on Deposit Accounts

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

Insurance and Retail Brokerage Commissions

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

108

Company also receives incentive-based contingency fees from the insurance carriers. Contingency fee revenue, which totals
approximately $0.5 million per year, is recognized as received due to the immaterial amount.

Retail brokerage income primarily consists of commissions received on annuity and investment product sales through a third-
party service provider. The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy or
the execution of an investment transaction. The Company does not earn a significant amount of trailer fees on annuity sales.
However, after considering the factors impacting these trailer fees, such as the uncertainty of investor behavior and changes in
the market value of assets, First Commonwealth determined that it would recognize trailing fees as received because it could
not reasonably estimate an amount of future trailing commissions for which collection is probable. Commissions from the third-
party service provider are received on a monthly basis based upon customer activity for the month. The fees are recognized
monthly with a receivable until commissions are received from the third-party service provider the following month. Because
the Company acts as an agent in arranging the relationship between the customer and the third-party service provider and does
not control the services rendered to the customers, retail brokerage fees are presented net of related costs, including $3.7 million
and $3.0 million, respectively, in commission expense as of December 31, 2021 and 2020.

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 at the point in time as the customer transactions are settled.

Other Income

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

Gains(losses) on sales of OREO

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

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 for the year
ended December 31:

Noninterest Income

In-scope of Topic 606:
Trust income
Service charges on deposit accounts
Insurance and retail brokerage commissions
Card related interchange income
Gain on sale of other loans and assets
Other income
Noninterest Income (in-scope of Topic 606)
Noninterest Income (out-of-scope of Topic 606)

Total Noninterest Income

2021

2020

2019

(dollars in thousands)

$

$

11,111
17,984
8,502
27,954
753
4,184
70,488
36,269
106,757

$

$

9,101
16,387
7,850
23,966
967
3,675
61,946
32,530
94,476

$

$

8,321
18,926
7,583
21,677
1,062
3,837
61,406
24,079
85,485

109

Note 22—Related Party Transactions

Some of First Commonwealth’s directors, executive officers, principal shareholders and their related interests had transactions
with the subsidiary bank in the ordinary course of business. All deposit and loan transactions were made on substantially the
same terms, such as collateral and interest rates, as those prevailing at the time for comparable transactions. In the opinion of
management, these transactions do not involve more than the normal risk of collectability nor do they present other unfavorable
features. It is anticipated that similar transactions will be entered into in the future.

The following is an analysis of loans to related parties (dollars in thousands):

December 31, 2020
Advances
Repayments
December 31, 2021

$

$

19,573
535
(1,155)
18,953

Note 23—Regulatory Restrictions and Capital Adequacy

The amount of funds available to the parent from its subsidiary bank is limited by restrictions imposed on all depository
institutions by banking regulation that restricts and limits the payment of dividends and the ability of depository institutions to
engage in transactions, including lending transactions and asset purchases, with affiliates.

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 which, 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, First Commonwealth became subject to regulatory risk-based capital rules adopted by the federal
banking agencies implementing Basel III. The capital rules require First Commonwealth to maintain the following minimum
capital levels:

•

•

•

•

a minimum Tier I capital to risk-weighted assets of at least 6.0%, plus a capital conservation buffer of 2.5%, resulting
in a required minimum ratio of 8.5%

a minimum Common Equity Tier 1 to risk weighted assets of at least 4.5%, plus the capital conservation buffer of
2.5%, resulting in a required minimum ratio of 7%.

a minimum Total Capital to risk weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting
in a required minimum of 10.5%

a minimum Leverage ratio, which is Tier 1 capital to adjusted average assets, of 4.0%

The capital conservation buffer may only include capital that qualifies as Common Equity Tier 1.

The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time
election, the exclusion of accumulated other comprehensive income from regulatory capital. The Company elected to retain this
treatment, which reduces the volatility of regulatory capital levels.

During the second quarter of 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in
subordinated debt, which under regulatory rules qualifies as Tier II capital. This subordinated debt issuance increased the total
risk-based capital ratio by 160 basis points.

As of December 31, 2021, the Company had $71.3 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
December 31, 2021, as we did not utilize the PPP Facility.

110

As of December 31, 2021 and 2020, 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 as set forth in the tables
below:

Actual

Capital
Amount

Ratio

Minimum Capital
Required

Capital
Amount

Ratio

(dollars in thousands)

Required to be
Considered Well
Capitalized

Capital
Amount

Ratio

As of December 31, 2021

Total Capital to Risk Weighted Assets

First Commonwealth Financial Corporation

$ 1,071,965

14.64 % $

768,723

10.50 % $

732,118

10.00 %

First Commonwealth Bank

Tier I Capital to Risk Weighted Assets

1,041,854

14.26

767,321

10.50

730,782

10.00

First Commonwealth Financial Corporation

$

894,670

12.22 % $

622,300

8.50 % $

585,694

8.00 %

First Commonwealth Bank

Tier I Capital to Average Assets

864,559

11.83

621,165

8.50

584,626

8.00

First Commonwealth Financial Corporation

$

894,670

9.73 % $

367,656

4.00 % $

459,570

5.00 %

First Commonwealth Bank

864,559

9.43

366,839

4.00

458,549

5.00

Common Equity Tier I to Risk Weighted Assets

First Commonwealth Financial Corporation

$

824,670

11.26 % $

512,482

7.00 % $

475,876

6.50 %

First Commonwealth Bank

864,559

11.83

511,547

7.00

475,008

6.50

Actual

Capital
Amount

Ratio

Minimum Capital
Required

Capital
Amount

Ratio

(dollars in thousands)

Required to be
Considered Well
Capitalized

Capital
Amount

Ratio

As of December 31, 2020

Total Capital to Risk Weighted Assets

First Commonwealth Financial Corporation

$ 1,010,608

14.88 % $

713,289

10.50 % $

679,323

10.00 %

First Commonwealth Bank

Tier I Capital to Risk Weighted Assets

974,911

14.36

712,995

10.50

679,043

10.00

First Commonwealth Financial Corporation

$

827,231

12.18 % $

577,424

8.50 % $

543,458

8.00 %

First Commonwealth Bank

Tier I Capital to Average Assets

791,568

11.66

577,186

8.50

543,234

8.00

First Commonwealth Financial Corporation

$

827,231

9.40 % $

352,023

4.00 % $

440,029

5.00 %

First Commonwealth Bank

791,568

9.01

351,244

4.00

439,055

5.00

Common Equity Tier I to Risk Weighted Assets

First Commonwealth Financial Corporation

$

757,231

11.15 % $

475,526

7.00 % $

441,560

6.50 %

First Commonwealth Bank

791,568

11.66

475,330

7.00

441,378

6.50

111

Note 24—Capital

At December 31, 2021, shareholders’ equity was $1.1 billion, an increase of $40.8 million from December 31, 2020. The
increase was primarily the result of $138.3 million in net income and $2.3 million in treasury stock sales. These increases were
partially offset by $43.6 million of dividends paid to shareholders, $31.3 million of common stock repurchases and a
$26.0 million decrease in the fair value of available for sale securities. Cash dividends declared per common share were
$0.455, $0.440 and $0.400 for the years ended December 31, 2021, 2020 and 2019, respectively.

As part of the Company's capital management, First Commonwealth's Board of Directors will periodically authorize stock
repurchase plans. On March 4, 2019, a share repurchase program was authorized for up to $25.0 million in shares of the
Company's common stock. This program completed prior to December 31, 2020, and resulted in the repurchase of 2,761,504
shares at an average price of $9.07. In January 2021, the Board of Directors authorized a $25.0 million share repurchase
program of the Company's common stock. This plan completed in October of 2021 and resulted in the repurchase of 1,161,056
at an average price of $13.44. In November 2021, the Board of Directors authorized a $25.0 million share repurchase program
of the Company's common stock. As of December 31, 2021, 937,670 shares at an average price of $15.39 have been
repurchased. First Commonwealth may suspend or discontinue the program at any time.

Note 25—Condensed Financial Information of First Commonwealth Financial Corporation (parent company only)

Statements of Financial Condition

Assets

Cash

Loans

Investment in subsidiaries

Investment in unconsolidated subsidiary trusts

Investment in jointly-owned company

Premises and equipment, net

Dividends receivable from subsidiaries

Other assets

Total assets

Liabilities and Shareholders’ Equity

Accrued expenses and other liabilities

Subordinated debentures payable

Shareholders’ equity

Total liabilities and shareholders’ equity

Statements of Income

Interest and dividends

Dividends from subsidiaries

Interest expense

Other income

Operating expense

Income before taxes and equity in undistributed earnings of
subsidiaries

Applicable income tax benefits

Income before equity in undistributed earnings of subsidiaries

Equity in undistributed earnings of subsidiaries

Net income

112

December 31,

2021

2020

(dollars in thousands)

$

11,649

$

34,427

9

11

1,152,580

1,108,801

2,181

357

3,244

7,762

8,212

2,182

338

3,476

3,038

7,307

$

$

1,185,994

4,455

72,167

$

$

1,159,580

18,796

72,167

1,109,372

1,068,617

$

1,185,994

$

1,159,580

For the years ended December 31,

2021

2020

2019

(dollars in thousands)

$

4

$

8

$

72,202

(3,205)

—

(4,721)

64,280

1,646

65,926

72,331

61,708

(3,229)

3

(4,687)

53,803

1,648

55,451

17,996

8

55,964

(3,735)

6

(4,525)

47,718

1,720

49,438

55,895

$

138,257

$

73,447

$

105,333

Statements of Cash Flow

Operating Activities
Net income

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation and amortization

Net gains on sales of assets

Decrease (increase) in prepaid income taxes

Undistributed equity in subsidiaries

Other net

Net cash provided by operating activities

Investing Activities

Net change in loans

Purchases of premises and equipment

Proceeds from sale of other assets

Net cash used in investing activities

Financing Activities

Dividends paid

Proceeds from reissuance of treasury stock

Purchase of treasury stock

Net cash used in financing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

For the years ended December 31,

2021

2020

2019

(dollars in thousands)

$

138,257

$

73,447

$

105,333

369

228

317

(72,330)

(14,830)

52,011

2

(101)
—

(99)

383

—

(317)

(17,996)

19,705

75,222

1

(20)
—

(19)

340

(2)

629

(55,895)

(2,957)

47,448

1

(586)
2

(583)

(43,611)

(42,982)

(39,394)

222

(31,301)

(74,690)

(22,778)

34,427

222

(20,905)

(63,665)

11,538

22,889

$

11,649

$

34,427

$

211

(6,259)

(45,442)

1,423

21,466

22,889

Cash dividends declared per common share were $0.455 for 2021, $0.440 in 2020 and $0.400 in 2019.

First Commonwealth Financial Corporation has an unsecured $20.0 million line of credit with another financial institution. As
of December 31, 2021, there are no amounts outstanding on this line and we are in compliance with all debt covenants related
to the line of credit.

113

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of First Commonwealth Financial Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial condition of First Commonwealth Financial
Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income,
comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company
at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Notes 1 and 8 to the consolidated financial statements, the Company changed its method for accounting for
credit losses in 2020 due to the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of
Credit Losses on Financial Instruments.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosure to which it relates.

114

Description of the
Matter

Allowance for Credit Losses

First Commonwealth’s loan and lease portfolio totaled $6.8 billion as of December 31, 2021 and the
associated ACL was $92.5 million. As discussed in Note 1 and 8 of the financial statements, the ACL
represents management’s current estimate of lifetime credit losses inherent in the loan portfolio at the
balance sheet date. The ACL is calculated by pooling loans of similar risk characteristics and applying a
discounted cash flow methodology after incorporating probability of default and loss given default
estimates. Inputs impacting the expected losses include a forecast of economic factors including national
unemployment, gross domestic product, and housing price index. The ACL also includes qualitative
factors related to loan portfolio risks not reflected in the calculated model, including lending practices,
ability and experience of the credit staff, the overall lending environment and external factors such as the
regulatory environment and competition, as well as the impact of COVID-19.

Auditing management’s ACL estimate and related provision for credit losses was complex due to the
discounted cash flow model and related inputs used to compute the reserve and involves a high degree of
subjectivity due to the judgment required in evaluating management’s determination of the qualitative
factors described above.

How We
Addressed the
Matter in Our
Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
Company’s controls over the ACL process, including controls over the appropriateness over the ACL
methodology, the expected loss models, the reliability and accuracy of data used in developing the ACL
estimate, and management’s review and approval process over the forecast, qualitative adjustments and
overall ACL results.

We tested management’s expected loss models including evaluating the conceptual soundness of model
methodology, assessing model performance and governance, testing key model assumptions, including the
reasonable and supportable forecast period, and independently recalculating model output with the
assistance of EY specialists. We also verified the underlying economic forecast data used to estimate the
quantitative reserve was complete and accurate.

To test the qualitative factor adjustments, among other procedures, we assessed management’s
methodology and considered whether relevant risks were reflected in the models and whether adjustments
to the model output were appropriate. We tested the completeness, accuracy, and relevance of the
underlying data used to estimate the qualitative adjustments. We evaluated whether qualitative
adjustments were reasonable based on changes in economic conditions and the loan portfolio. For
example, we evaluated the reasonableness of qualitative adjustments for economic trends and conditions
by independently comparing loan portfolio information. We also assessed whether qualitative
adjustments were consistent with publicly available information (e.g. macroeconomic data). Further, we
performed an independent search for the existence of new or contrary information relating to risks
impacting the qualitative factor adjustments to validate that management’s considerations are appropriate.
Additionally, we evaluated whether the overall ACL, inclusive of qualitative factor adjustments,
appropriately reflects losses expected in the loan portfolio by comparing to historical losses and peer bank
data.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.
Pittsburgh, Pennsylvania
February 28, 2022

115

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of First Commonwealth Financial Corporation

Opinion on Internal Control over Financial Reporting

We have audited First Commonwealth Financial Corporation and subsidiaries internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, First
Commonwealth Financial Corporation Company and subsidiaries (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2021 and 2020, the related
consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period
ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion
thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania
February 28, 2022

116

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.

Controls and Procedures

Disclosure 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.

In addition, our management, including our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation
of our internal controls over financial reporting to determine whether any changes occurred during the fourth fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. No such
changes were identified in connection with this evaluation.

Ernst & Young LLP, Pittsburgh, Pennsylvania, (U.S. PCAOB Auditor Firm I.D.: 42), the independent registered public
accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an
attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2021. The report,
which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31,
2021, is included at the end of Item 8 under the heading Report of "Independent Registered Public Accounting Firm.”

117

MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

First Commonwealth is responsible for the preparation, the integrity, and the fair presentation of the Consolidated Financial
Statements included in this annual report. The Consolidated Financial Statements and notes to the financial statements have
been prepared in conformity with generally accepted accounting principles and include some amounts based upon
management’s best estimates and judgments.

First Commonwealth’s management is responsible for establishing and maintaining effective internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f), that is designed to produce reliable financial statements in
conformity with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements. Under the supervision and with the participation of management,
including First Commonwealth’s principal executive officer and principal financial officer, First Commonwealth conducted an
evaluation of the effectiveness of internal control over financial reporting based on criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

All internal control systems, no matter how well designed, have inherent limitations, including the possibility that a control can
be circumvented and that misstatements due to error or fraud may occur without detection. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.

Based on First Commonwealth’s evaluation based on criteria established in Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), management concluded that
internal control over financial reporting was effective as of December 31, 2021. The effectiveness of First Commonwealth’s
internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young, LLP, an independent
registered public accounting firm, as stated in their attestation report which is included herein.

First Commonwealth Financial Corporation
Indiana, Pennsylvania

February 28, 2022

/S/ T. Michael Price

T. Michael Price

/S/

James R. Reske
James R. Reske

President and Chief Executive Officer

Executive Vice President, Chief Financial Officer and Treasurer

118

ITEM 9B.

Other Information

None.

119

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

Information called for by this item concerning the identification, business experience and qualifications of First
Commonwealth’s directors will be included in First Commonwealth’s definitive Proxy Statement to be filed with the Securities
and Exchange Commission in connection with the annual meeting of shareholders to be held April 26, 2022 (the “Proxy
Statement”), under the heading “Proposal 1—Election of Directors,” and is incorporated herein by reference.

Information called for by this item concerning First Commonwealth’s compliance with section 16(a) of the Exchange Act will
be included in the Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance,” and is
incorporated herein by reference.

First Commonwealth has adopted a code of conduct and ethics that applies to all employees of the Company, including
executive officers. In addition, First Commonwealth has adopted a code of ethics for the Chief Executive Officer and all senior
financial officers of the Company. Both of these codes are filed as exhibits to this Annual Report on Form 10-K and are posted
on First Commonwealth’s website at http://www.fcbanking.com. Refer to Item 15 of this Annual Report on Form 10-K for a list
of exhibits.

Information called for by this item concerning First Commonwealth’s Audit Committee and the identification of “Audit
Committee financial experts” will be included in the Proxy Statement under the heading “Corporate Governance,” and is
incorporated herein by reference.

Certain information regarding executive officers is included under the caption “Executive Officers of First Commonwealth
Financial Corporation” after Part I, Item 4, of this Report.

ITEM 11.

Executive Compensation

Information called for by this item concerning compensation of First Commonwealth’s executive officers and the report of the
Compensation and Human Resources Committee will be included in the Proxy Statement under the heading “Executive
Compensation,” and is incorporated herein by reference.

Information called for by this item concerning compensation of First Commonwealth’s directors will be included in the Proxy
Statement under the heading “Compensation of Directors,” and is incorporated herein by reference.

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information called for by this item concerning security ownership of certain beneficial owners and security ownership of
management will be included in the Proxy Statement under the headings “Stock Ownership of Certain Beneficial Owners” and
“Stock Ownership of Directors and Management,” and is incorporated herein by reference.

The following table provides information related to our existing equity compensation plans as of December 31, 2021:

Plan Category

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Total

Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

391,100

N/A

391,100

Weighted average
exercise price of
outstanding
options, warrants
and rights

Number of
securities
remaining
available for
future issuance
under equity
compensation
plans

N/A

N/A

N/A

2,434,596

N/A

2,434,596

The number of securities to be issued upon exercise of outstanding option, warrants and rights represent the maximum number
of shares that may be issued pursuant to outstanding performance units.

120

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

Information called for by this item concerning transactions with related persons and review, approval or ratification of
transactions with related persons will be included in the Proxy Statement under the heading “Related Party Transactions,” and is
incorporated herein by reference.

Information called for by this item concerning director independence will be included in the Proxy Statement under the heading
“Corporate Governance,” and is incorporated herein by reference.

ITEM 14.

Principal Accountant Fees and Services

Information called for by this item concerning fees paid to First Commonwealth’s principal accountant and First
Commonwealth’s pre-approval policies and procedures will be included in the Proxy Statement under the heading “Audit
Information,” and is incorporated herein by reference.

121

PART IV
ITEM 15.

Exhibits, Financial Statements and Schedules

(A)

Documents Filed as Part of this Report
Financial Statements
(a)

All financial statements of the registrant as set forth under Item 8 of the Report on Form 10-K.

(2)

Financial Statement Schedules

Description

Indebtedness to Related Parties

Guarantees of Securities of Other Issuers

(3)

Exhibits

Page

N/A

N/A

Description
Amended and Restated Articles of Incorporation of
First Commonwealth Financial Corporation

Incorporated by Reference to
Exhibit 3.1 to the quarterly report on Form
10-Q for the quarter ended June 30, 2010

Amended and Restated By-Laws of First
Commonwealth Financial Corporation

Amended and Restated Non-Qualified Deferred
Compensation Plan (formerly known as the
Supplemental Executive Retirement Plan)

Amendment No, One to Amended and Restated Non-
Qualified Deferred Compensation Plan

Amendment No, Two to Amended and Restated Non-
Qualified Deferred Compensation Plan

Amendment No, Three to Amended and Restated Non-
Qualified Deferred Compensation Plan

Amended and Restated Employment Agreement dated
January 1, 2012 entered into among First
Commonwealth Financial Corporation, First
Commonwealth Bank and T. Michael Price

Exhibit 3.1 to the current report as Form 8-K
filed February 1, 2016

Exhibit 10.1 to the current report on Form 8-
K filed December 21, 2017

Exhibit 10.1 to the quarterly report on Form
10-Q for the quarter ended September 30,
2021

Exhibit 10.2 to the quarterly report on Form
10-Q for the quarter ended September 30,
2021

Exhibit 10.3 to the quarterly report on Form
10-Q for the quarter ended September 30,
2021

Exhibit 10.1 to the current report on Form 8-
K filed January 5, 2012

Change of Control Agreement dated December 30,
2011 entered into between FCFC and T. Michael Price

Exhibit 10.3 to the current report on Form 8-
K filed January 5, 2012

First Commonwealth Financial Corporation Incentive
Compensation Plan

10.8

2021 Annual Incentive Plan

2019-2021 Long-Term Incentive Plan

2020-2022 Long-Term Incentive Plan

2021-2023 Long-Term Incentive Plan

Annex I to Proxy Statement filed March 19,
2015 relating to the 2015 Annual Meeting of
Shareholders

Exhibit 10.1 to the quarterly report on
Form 10-Q for the quarter ended March 31,
2021

Exhibit 10.2 to the quarterly report on Form
10-Q for the quarter ended March 31, 2019

Exhibit 10.2 to the quarterly report on Form
10-Q for the quarter ended March 31, 2020

Exhibit 10.2 to the quarterly report on Form
10-Q for the quarter ended March 31, 2021

Form of Restricted Stock Agreement for service-based
restricted stock

Exhibit 10.3 to the quarterly report on
Form 10-Q filed May 8, 2012

Change of Control Agreement dated December 30,
2011 entered into between FCFC and Leonard V.
Lombardi

Exhibit 10.13 to the annual report on Form
10-K filed March 5, 2012

Schedule
Number

I

II

Exhibit
Number
3.1

3.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.9

10.1

10.11

10.12

10.13

122

Exhibit
Number
10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

21.1

23.1

31.1

31.2

32.1

32.2

101.00

Description
Change of Control Agreement dated December 30,
2011 entered into between FCFC and Matthew C.
Tomb

Employment Agreement dated April 10, 2014 between
First Commonwealth Financial Corporation and James
R. Reske

Change of Control Agreement dated April 10, 2014
between First Commonwealth Financial Corporation
and James R. Reske

Change of Control Agreement dated November 14,
2019 entered into between FCFC and Norman J.
Montgomery

Incorporated by Reference to
Exhibit 10.14 to the annual report on Form
10-K filed March 5, 2012

Exhibit 10.1 to the current report on Form
8-K filed April 10, 2014

Exhibit 10.3 to the current report on Form
8-K filed April 10, 2014

Exhibit 10.1 to current report on Form 8-K
filed November 19, 2019

Change of Control Agreement dated March 1, 2013
entered into between FCFC and Carrie L. Riggle

Exhibit 10.4 to the quarterly report on Form
10-Q filed May 8, 2013

Change of Control Agreement dated May 31, 2013
entered into between FCFC and Jane Grebenc

Exhibit 10.2 to the quarterly report on Form
10-Q filed August 7, 2013

Employment Agreement dated May 31, 2013 entered
into between FCFC and Jane Grebenc

Exhibit 10.1 to the quarterly report on Form
10-Q filed August 7, 2013

Employment Agreement dated September 19, 2016
entered into between FCFC and Brian Karrip

Exhibit 10.1 to the quarterly report on Form
10-Q filed November 9, 2016

Change of Control Agreement dated September 19,
2016 entered into between FCFC and Brian Karrip

Exhibit 10.2 to the quarterly report on Form
10-Q filed November 9, 2016

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Subsidiaries of the Registrant

Consent of EY LLP Independent Registered Public
Accounting Firm

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

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

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

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

The following materials from First Commonwealth
Financial Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2020, formatted in
XBRL (Extensible Business Reporting Language): (i)
the Consolidated Balance Sheets at December 31, 2021
and December 31, 2020, (ii) the Consolidated
Statements of Income for the years ended December
31, 2021, 2020 and 2019, (iii) the Consolidated
Statements of Comprehensive Income for the years
ended December 31, 2021, 2020 and 2019, (iv) the
Consolidated Statements of Changes in Shareholders’
Equity for the years ended December 31, 2021, 2020
and 2019, (v) the Consolidated Statements of Cash
Flows for the years ended December 31, 2021, 2020
and 2019, and (vi) the Notes to Consolidated Financial
Statements.

ITEM 16.

Form 10-K Summary

None.

123

Pursuant to the requirements of Section 13 or 15(d) 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, in Indiana, Pennsylvania.

SIGNATURES

FIRST COMMONWEALTH FINANCIAL CORPORATION (Registrant)

By:

/S/ T. Michael Price

T. Michael Price
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated: February 28, 2022

Signature

Capacity

Date

Director

Director

Director

Director

Director

February 28, 2022

February 28, 2022

February 28, 2022

February 28, 2022

February 28, 2022

Director, Chairman

February 28, 2022

Executive Vice President and Chief
Revenue Officer

Director

Director

Director

Director

February 28, 2022

February 28, 2022

February 28, 2022

February 28, 2022

February 28, 2022

President and Chief Executive Officer
(Principal Executive Officer)

February 28, 2022

Executive Vice President, Chief
Financial Officer, and Treasurer

Director

Director

February 28, 2022

February 28, 2022

February 28, 2022

/S/

Julie A. Caponi

Julie A. Caponi

/S/ Ray T. Charley
Ray T. Charley

/S/ Gary R. Claus
Gary R. Claus

/S/ David S. Dahlmann
David S. Dahlmann

/S/

Johnston A. Glass
Johnston A. Glass

/S/

Jon L. Gorney
Jon L. Gorney

/S/ Jane Grebenc

Jane Grebenc

/S/ David W. Greenfield
David W. Greenfield

/S/ Bart E. Johnson
Bart E. Johnson

/S/ Luke A. Latimer
Luke A. Latimer

/S/ Aradhna M. Oliphant

Aradhna M. Oliphant

/S/ T. Michael Price

T. Michael Price

/S/

James R. Reske
James R. Reske

/S/ Robert J. Ventura
Robert J. Ventura

/S/ Stephen A. Wolfe
Stephen A. Wolfe

124

Exhibit 21.1 Subsidiaries of First Commonwealth Financial Corporation

Percent Ownership by Registrant

First Commonwealth Bank
601 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

Subsidiaries of First Commonwealth Bank

First Commonwealth Insurance Agency
601 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

First Commonwealth Community Development Corporation (Inactive)
654 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

First Commonwealth Financial Advisors Incorporated
601 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

FraMal Holdings Corporation
1100 N. Market Street, 4th Floor
Wilmington, DE 19890
Incorporated under laws of Delaware

First Commonwealth Capital Trust II
601 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

First Commonwealth Capital Trust III
601 Philadelphia Street
Indiana, PA 15701
Incorporated under laws of Pennsylvania

Commonwealth Trust Credit Life Insurance Company
3101 North Central Avenue, Suite 400
Phoenix, AZ 85012
Incorporated under laws of Arizona

100%

100%

100%

100%

100%

100%

100%

50%

Exhibit 23.1 Consent of Independent Registered Public Accounting Firm

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-226681) of First Commonwealth Financial Corporation, and

(2) Registration Statement (Form S-3 No. 333-187288) of First Commonwealth Financial Corporation, and

(3) Registration Statement (Form S-8 No. 333-159090) of First Commonwealth Financial Corporation, and

(4) Registration Statement (Form S-8 No. 333-238312) of First Commonwealth Financial Corporation

of our reports dated February 28, 2022, with respect to the consolidated financial statements of First Commonwealth Financial
Corporation and the effectiveness of internal control over financial reporting of First Commonwealth Financial Corporation
included in this Annual Report (Form 10-K) of First Commonwealth Financial Corporation for the year ended December 31,
2021.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania
February 28, 2022

EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, T. Michael Price, certify that:

1.

2.

3.

4.

I have reviewed this annual report on Form 10-K of First Commonwealth Financial Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

b)

c)

d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons
performing the equivalent functions):

a)

b)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.

February 28, 2022
Date

/S/ T. Michael Price
Signature

President and Chief Executive Officer
Title

EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James R. Reske, certify that:

1.

2.

3.

4.

I have reviewed this annual report on Form 10-K of First Commonwealth Financial Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

b)

c)

d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons
performing the equivalent functions):

a)

b)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.

February 28, 2022
Date

James R. Reske

/S/
Signature

Executive Vice President, Chief Financial Officer and Treasurer
Title

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADDED BY SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

I, T. Michael Price, President and Chief Executive Officer of First Commonwealth Financial Corporation (“First
Commonwealth”), certify that the Annual Report of First Commonwealth on Form 10-K for the period ended December 31,
2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all material respects, the financial condition of First Commonwealth at
the end of such period and the results of operations of First Commonwealth for such period.

DATED: February 28, 2022

/S/ T. Michael Price
T. Michael Price
President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADDED BY SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

I, James R. Reske, Executive Vice President, Chief Financial Officer and Treasurer of First Commonwealth Financial
Corporation (“First Commonwealth”), certify that the Annual Report of First Commonwealth on Form 10-K for the period
ended December 31, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of First
Commonwealth at the end of such period and the results of operations of First Commonwealth for such period.

DATED: February 28, 2022

James R. Reske

/S/
James R. Reske
Executive Vice President, Chief Financial Officer and Treasurer

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First Commonwealth Financial Corporation
601 Philadelphia Street
Indiana, Pennsylvania 15701-0400
(724) 349.7220
(800) 711.BANK (2265)
fcbanking.com