FIRST COMMONWEALTH FINANCIAL CORP PA

Previous wording

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, 2023, FCB operated 126 community banking offices throughout Pennsylvania and Ohio, as well as loan production offices in Harrisburg, Pennsylvania, and Cleveland, Columbus, Canton, Canfield and Hudson, Ohio.

Current wording

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, 2024, FCB operated 124 community banking offices throughout Pennsylvania and Ohio, as well as loan production offices in Harrisburg, Pennsylvania, and Cleveland, Columbus, Canton, Canfield and Hudson, Ohio.

Previous wording

Net income for 2023 was $157.1 million, or $1.54 per diluted share, as compared to net income of $128.2 million, or $1.37 per diluted share in 2022. The increase in net income was the result of an increase of $73.5 million in net interest income and a $16.9 million decrease in provision for credit losses, excluding the $10.7 million in provision expense related to the day 1 adjustment on non-PCD loans acquired in the Centric acquisition. Partially offsetting these positive changes was an increase of $40.3 million in noninterest expense and a decrease of $2.1 million in noninterest income.

Current wording

Net income for 2024 was $142.6 million, or $1.39 per diluted share, as compared to net income of $157.1 million, or $1.54 per diluted share in 2023. Contributing to the decrease in net income was a $6.8 million decline in net interest income and a $14.4 million increase in provision for credit losses. Provision for credit losses in 2023 included $10.7 million related to the day 1 adjustment on non-PCD loans acquired in the Centric acquisition. Noninterest expense increased $0.8 million in 2024 compared to 2023, however 2023 included $8.9 million in expenses related to the Centric acquisition. Noninterest income increased $2.6 million in 2024 compared to 2023 despite a decline of $6.8 million in card-related interchange income as a result of the Company being subject to the Durbin Amendment to the Dodd-Frank Act beginning July 1, 2024.

Previous wording

Our return on average equity was 12.8% and our return on average assets was 1.42% for 2023, compared to 12.0% and 1.34%, respectively, for 2022.

Current wording

Our return on average equity was 10.4% and our return on average assets was 1.22% for 2024, compared to 12.8% and 1.42%, respectively, for 2023.

Previous wording

Average diluted shares for the year 2023 were 8% more than the comparable period in 2022 primarily due to $141.4 million in common stock issued as part of the Centric acquisition, offset by $15.1 million of common stock buybacks completed during 2023.

Current wording

Average diluted shares for the year 2024 were 0.4% more than the comparable period in 2023 primarily due to $12.7 million of common stock buybacks completed during 2024.

Previous wording

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 2023 was $1.2 million compared to $1.0 million in 2022. Net interest income comprises a majority of our revenue (net interest income before provision expense plus noninterest income) at 80% and 76% for the years ended December 31, 2023 and 2022, respectively.

Current wording

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 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 2024 was $1.3 million compared to $1.2 million in 2023. Net interest income comprises a majority of our revenue (net interest income before provision expense plus noninterest income) at 79% and 80% for the years ended December 31, 2024 and 2023, respectively.

Previous wording

Net interest income, on a fully taxable equivalent basis, was $386.9 million for the year-ended December 31, 2023, a $73.6 million, or 24%, increase compared to $313.3 million for the same period in 2022. The net interest margin, on a fully taxable equivalent basis, increased 23 basis points to 3.81% in 2023 from 3.58% in 2022. 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.

Current wording

Net interest income, on a fully taxable equivalent basis, was $380.2 million for the year-ended December 31, 2024, a $6.7 million, or 2%, decrease compared to $386.9 million for the same period in 2023. The net interest margin, on a fully taxable equivalent basis, decreased 26 basis points to 3.55% in 2024 from 3.81% in 2023. Net interest income and the net interest margin are affected by both changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

Previous wording

The impact of growth in interest-earning assets in 2023 was further impacted by the effect of the mix of the asset growth and higher interest rates, resulting in an increase in the net interest margin for the year ended December 31, 2023. Average earning assets for the year ended December 31, 2023 increased $1.4 billion, or 16%, compared to the year ended December 31, 2022. Ending balances of interest earning assets acquired as part of the Centric acquisition totaled $965.5 million. The change in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $55.9 million in the year ended December 31, 2023 compared to the same period in 2022, and changes in rates positively impacted net interest income by $17.7 million. Interest-sensitive assets totaling $5.1 billion will either reprice or mature over the next twelve months.

Current wording

The growth in interest-earning assets as well as the higher interest rate environment had a positive impact on interest income for the year ended December 31, 2024. Average earning assets for the year ended December 31, 2024 increased $0.6 billion, or 6%, compared to the year ended December 31, 2023 and interest income increased $70.5 million, or 13.3%. Interest-sensitive assets totaling $5.1 billion will either reprice or mature over the next twelve months.

Previous wording

The taxable equivalent yield on interest-earning assets was 5.23% for the year ended December 31, 2023, an increase of 144 basis points from the 3.79% yield for the same period in 2022. This change is the result of a higher interest rate environment in 2023 and resulted in the loan and leases portfolio yield increasing by 141 basis points compared to the prior year. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased by 227 basis points. During 2023, the Federal Reserve increased short-term interest rates by 100 basis points. Additionally, nine basis points of the increase in the yield on interest-earning assets can be attributed to the recognition of $9.1 million in accretion of the purchase accounting marks, primarily from the Centric acquisition.

Current wording

The taxable equivalent yield on interest-earning assets was 5.62% for the year ended December 31, 2024, an increase of 39 basis points from the 5.23% yield for the same period in 2023. This change is the result of a higher market interest rate rates for the majority of 2024 and resulted in the loan and leases portfolio yield increasing by 38 basis points. Contributing to this increase were the yields on our indirect automobile loan portfolio and adjustable and variable rate commercial loan portfolios, which increased by 78 basis points and 13 basis points, respectively. Additionally, for the year ended December 31, 2024 seven basis points of the yield on interest-earning assets can be attributed to the recognition of $7.5 million in accretion of purchase accounting marks, primarily from the Centric acquisition. For the year ended December 31, 2023, $9.1 million in accretion of purchase accounting marks benefited the yield on interest-earning assets by nine basis points.

Previous wording

As of December 31, 2023, 51% of our loan portfolio had variable or adjustable interest rates and 49% had fixed interest rates. After incorporating the impact of our cash flow hedges that convert the interest rate on $500.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 46% of our loan portfolio. Loans with variable or adjustable interest rates include approximately 15% tied to the prime interest rate, 20% tied to SOFR, 6% tied to Treasury rates, 5% tied to Federal Home Loan Bank rates, 3% tied to swap rates and 3% tied to BSBY.

Current wording

As of December 31, 2024, 51% of our loan portfolio had variable or adjustable interest rates and 49% had fixed interest rates. After incorporating the impact of our cash flow hedges that convert the interest rate on $425.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 46% of our loan portfolio. Loans with variable or adjustable interest rates include approximately 27% tied to the prime interest rate, 50% tied to SOFR, 11% tied to Treasury rates, 10% tied to Federal Home Loan Bank rates.

Previous wording

Also contributing to the increase in yield on interest-earning assets was the yield onthe investment portfolio, which increased by 48 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $118.0 million as maturities and runoff funded loan growth. The yield on interest-bearing deposits with banks increased 448 basis points compared to the prior year as a result of higher interest rates while the average balance decreased $12.2 million.

Current wording

Also contributing to the increase in yield on interest-earning assets was the yield onthe investment portfolio, which increased by 90 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance increased $276.0 million as growth in average deposits exceeded the funding needs for loan growth. The yield on interest-bearing deposits with banks increased 13 basis points compared to the prior year as a result of higher interest rates, while the average balance decreased $11.8 million.

Previous wording

Increases in the cost of interest-bearing liabilities partially offset the positive impact of higher yields on interest-earning assets. The cost of interest-bearing liabilities was 2.03% for the year ended December 31, 2023, compared to 0.31% for the same period in 2022. The increase of 161 basis points in the cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates offered on money market accounts and time deposits. Average time deposits increased $620.1 million, or 175.9%, with an increase in the cost of these deposits of 294 basis points. Contributing to the average growth in time deposits was an average of $84.9 million related to the Centric acquisition. Other interest-bearing deposits increased an average of $537.3 million, or 10.8%, increasing the cost of deposits 135 basis points. Contributing to the growth in average other interest-bearing deposits was an average of $341.0 million of interest-bearing deposits related to the Centric acquisition.

Current wording

Increases in the cost of interest-bearing liabilities offset the positive impact of higher yields on interest-earning assets. The cost of interest-bearing liabilities was 2.83% for the year ended December 31, 2024, compared to 2.03% for the same period in 2023. The increase of 92 basis points in the cost of interest-bearing deposits can be attributed to market interest rates, which influenced the mix of deposits as customers moved funds into higher costing deposits to take advantage of the increased rates offered on money market accounts and time deposits. Average time deposits increased $577.3 million, or 59.3%, with an increase in the cost of these deposits of 104 basis points. Other interest-bearing deposits increased an average of $128.4 million, or 2.3%, increasing the cost of deposits 74 basis points.

Previous wording

The cost of short-term borrowings increased 357 basis points in comparison to the same period in the prior year. Average short-term borrowings increased by $294.7 million for the year ended December 31, 2023 compared to the same period in 2022. Average long-term debt increased $5.0 million, while the cost of long-term debt increased by 49 basis points primarily due to increasing rates on the variable rate portion of the subordinated debentures.

Current wording

The cost of short-term borrowings decreased 35 basis points in comparison to the same period in the prior year. Average short-term borrowings increased by $4.9 million for the year ended December 31, 2024 compared to the same period in 2023. Average long-term debt decreased $0.1 million, while the cost of long-term debt decreased by 4 basis points.

Previous wording

Comparing the year ended December 31, 2023 with the same period in 2022, changes in rates positively impacted net interest income by $17.7 million. The higher yield on interest-earning assets increased net interest income by $137.3 million, while the change in the cost of interest-bearing liabilities negatively impacted net interest income by $119.6 million.

Current wording

Comparing the year ended December 31, 2024 with the same period in 2023, changes in rates negatively impacted net interest income by $8.2 million. The higher yield on interest-earning assets increased net interest income by $47.8 million, while the change in the cost of interest-bearing liabilities negatively impacted net interest income by $56.0 million.

Previous wording

Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $55.9 million in the year ended December 31, 2023 compared to the same period in 2022. Higher levels of interest-earning assets resulted in an increase of $62.9 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $7.0 million, primarily due to increases in short-term borrowings and time deposits.

Current wording

Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $1.5 million in the year ended December 31, 2024 compared to the same period in 2023. Higher levels of interest-earning assets resulted in an increase of $22.8 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $21.3 million, primarily due to growth in time and savings deposits.

Previous wording

Net interest income was negatively impacted by a decrease of $45.3 million in average net free funds at December 31, 2023 as compared to December 31, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The lower level of net free funds was primarily the result of lower noninterest-bearing demand deposits as customers became more rate sensitive in the increasing rate environment and an increase in noninterest-earning assets, largely due to the Centric acquisition.

Current wording

Net interest income was negatively impacted by a decrease of $147.3 million in average net free funds at December 31, 2024 as compared to December 31, 2023. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The lower level of net free funds was primarily the result of lower noninterest-bearing demand deposits as customers became more rate sensitive.

Previous wording

The provision for credit losses on loans and leases for 2023 totaled $14.8 million, including $10.7 million recognized as the day 1 non-PCD provision expense related to the Centric acquisition. Provision expense in 2023 was a decrease of $6.3 million compared to the $21.1 million provision recognized in 2022. The decrease is a result of a $10.4 million decline in the calculated provision for outstanding loans and leases due to improvements in economic variables considered in the calculation as well as a $6.5 million decrease in the provision for off-balance sheet commitments. The negative provision for off-balance sheet commitments was the result of lower off-balance sheet commitments related to construction loans and improvement in the economic variables considered in the calculation.

Current wording

The provision for credit losses in 2024 totaled $29.2 million, reflecting an increase of $14.4 million compared to the $14.8 million provision recognized in 2023. Included in the provision expense for 2023 was $10.7 million in day 1 non-PCD expense related to the Centric acquisition. Provision expense related to outstanding loans and leases, excluding the impact of the day 1 non-PCD expense in 2023, increased $25.3 million in 2024. This increase can be primarily attributed to $31.2 million in net charge-offs and a $3.1 million increase in specific reserves. The provision for off-balance sheet commitments decreased $0.3 million in 2024 compared to 2023 as a result of lower off-balance sheet commitments related to construction loans.

Previous wording

Provision expense for the commercial, financial, agricultural and other category was impacted by an increase of $1.8 million in provision expense related to the equipment finance portfolio, which accounted for $153.3 million of the $331.6 million growth in outstanding balances for this loan category. Also, impacting provision expense were net charge-offs of $3.9 million, for which the allowance was not provided for in prior periods or through PCD purchase accounting marks. Provision expense for the commercial real estate category was impacted by a $4.3 million charge off related to one borrower and an increase in general reserves due to $628.1 million in loan growth. Increase in the residential real estate category is due primarily to $222.2 million in loan growth. Net charge-offs related to loans to individuals were $5.0 million for the year ended December 31, 2023, including $3.8 million for indirect auto loans and $1.1 million related to other consumer loans. The provision expense for loans to individuals was also impacted by growth in the portfolio of $60.0 million.

Current wording

The level of provision expense in 2024 was primarily related to two loan categories including the commercial, financial, agricultural and other category as well as commercial real estate. These two categories accounted for $27.5 million of the $32.4 million total provision expense for loans and leases. Provision expense for the commercial, financial, agricultural and other category was $15.8 million in 2024 and was impacted by an increase of $11.5 million in provision expense related to time and demand loans and an increase of $3.4 million in provision expense related to the equipment finance portfolio. The increase in the provision expense related to the time and demand category can be attributed to $10.7 million in net charges-offs as well as an increase of $0.7 million in specific reserves primarily due to new loans moved to nonaccrual during 2024. The increase in the provision expense related to the equipment finance portfolio can be attributed to growth in the portfolio of $194.4 million, or 83%, and $1.8 million in net charge-offs. Provision expense for the commercial real estate category was impacted by $8.5 million in net charge-offs and an increase in general reserves due to $71.6 million in loan growth. Additionally, the $1.4 million negative provision for the residential real estate category can be attributed to a $75.2 million decrease in outstanding loan balances. Net charge-offs related to loans to individuals were $6.8 million for the year ended December 31, 2024, including $5.2 million for indirect auto loans and $1.2 million related to other consumer loans.

Previous wording

The allowance for credit losses was $117.7 million, or 1.31%, of total loans and leases outstanding at December 31, 2023, compared to $102.9 million, or 1.35%, at December 31, 2022. Nonperforming loans as a percentage of total loans decreased to 0.44% at December 31, 2023 from 0.46% at December 31, 2022. The allowance to nonperforming loan ratio was 298.2% as of December 31, 2023 and 290.0% at December 31, 2022. Net charge-offs were $30.2 million for the year ended December 31, 2023 compared to $7.1 million for the same period in 2022, an increase of $23.0 million. During 2023, $17.0 million in charge-offs were recognized related to loans acquired through the Centric acquisition. These loans were considered PCD loans for which $14.3 million were provided for as part of the day 1 provision. In addition, a $4.3 million charge-off was recognized on one commercial real estate relationship.

Current wording

The allowance for credit losses was $118.9 million, or 1.32%, of total loans and leases outstanding at December 31, 2024, compared to $117.7 million, or 1.31%, at December 31, 2023. Nonperforming loans as a percentage of total loans increased to 0.68% at December 31, 2024 from 0.44% at December 31, 2023. The allowance to nonperforming loan ratio was 193.5% as of December 31, 2024 and 298.2% at December 31, 2023. Net charge-offs were $31.2 million for the year ended December 31, 2024 compared to $30.2 million for the same period in 2023, an increase of $1.0 million. During 2024, $11.1 million in charge-offs were recognized related to loans acquired through the Centric acquisition; $2.4 million of these charge-offs were specifically provided for as part of the PCD allowance for credit losses at acquisition.

Previous wording

The provision for income taxes of $40.5 million in 2023 reflects an increase of $8.5 million compared to the provision for income taxes in 2022, as a result of a $37.4 million increase in the level of income before taxes.

Current wording

The provision for income taxes of $35.6 million in 2024 reflects a decrease of $4.9 million compared to the provision for income taxes in 2023 as a result of a $19.3 million decrease in the level of income before taxes.

Previous wording

The effective tax rate was 20.5% and 20.0% for tax expense in 2023 and 2022, 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.

Current wording

The effective tax rate was 20.0% and 20.5% for tax expense in 2024 and 2023, 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.

Previous wording

First Commonwealth’s total assets increased $1.7 billion as of December 31, 2023 compared to December 31, 2022. The growth in total assets was impacted by the $1.0 billion in assets acquired as a result of the Centric acquisition on January 31, 2023. Loans and leases, including loans held for sale, increased $1.3 billion, or 18%, including $0.9 billion attributed to the loans acquired from Centric. Loan growth in 2023, excluding loans acquired from Centric, was experienced in all loan categories, with residential real estate and commercial real estate loans accounting for a majority of the growth. Investment securities increased $216.2 million, or 18% and cash and interest-bearing balances with banks decreased $7.3 million, or 5%.

Current wording

First Commonwealth’s total assets increased $0.1 billion as of December 31, 2024 compared to December 31, 2023. Loans and leases, including loans held for sale, increased $37.2 million. Loan growth, excluding loans held for sale, in 2024 totaled $15.0 million with equipment finance loans accounting for a majority of the growth. Investment securities increased $113.3 million, or 8% and cash and interest-bearing balances with banks decreased $13.6 million, or 9%.

Previous wording

Total shareholders' equity increased $262.2 million in 2023. The growth in shareholders' equity was the result of net income of $157.1 million, $141.4 million in common stock issued in conjunction with the Centric acquisition and a $25.9 million increase in accumulated other comprehensive income, offset by $50.8 million in dividends declared and $15.1 million in stock repurchases.

Current wording

Total shareholders' equity increased $90.9 million in 2024. The growth in shareholders' equity was the result of net income of $142.6 million and a $9.2 million increase in accumulated other comprehensive income, offset by $52.6 million in dividends declared and $12.7 million in stock repurchases.

Previous wording

The following table shows a breakdown of our loan portfolio between loans originated and loans acquired through the Centric acquisition as of December 31, 2023:

Current wording

The level of the loan portfolio in 2023 was impacted by the Centric acquisition. To better understand the changes to loan portfolio in 2023, the following table shows a breakdown of our loan portfolio between loans originated and loans acquired through the Centric acquisition as of December 31, 2023:

Previous wording

First Commonwealth has a legal lending limit of $183.3 million to any one borrower or closely related group of borrowers, but has established lower thresholds for credit risk management.

Current wording

First Commonwealth has a legal lending limit of $190.3 million to any one borrower or closely related group of borrowers, but has established lower thresholds for credit risk management.

Previous wording

Commercial real estate comprises 34% of our total loan portfolio. The following table summarizes the commercial real estate portfolio by type of property securing the credit as December 31:

Current wording

The following table represents our commercial real estate portfolio by type of property securing the credit as of December 31, 2024. Total non-pass commercial real estate loans increased by $13.0 million to $109.8 million when compared to December 31, 2023.

Previous wording

When calculating the allowance for credit losses the commercial real estate portfolio is segmented into three portfolio segments; multifamily, non-owner occupied and owner occupied. For additional information, including credit quality, related to these segments, see Note 9 "Loans and Leases and Allowance for Credit Losses" of the Consolidated Financial Statements.

Current wording

When calculating the allowance for credit losses the commercial real estate portfolio is segmented into three portfolio segments: multifamily, non-owner occupied and owner occupied. For additional information related to these segments, including credit quality, see Note 9 "Loans and Leases and Allowance for Credit Losses" of the Consolidated Financial Statements.

Previous wording

Net charge-offs were $30.2 million in 2023 compared to $7.1 million for the year 2022. The most significant credit losses recognized during the year include $17.0 million in charge-offs related to the Centric acquisition. Net charge-offs in the commercial, financial, agricultural and other category totaled $18.7 million, of which $14.8 million were related to the Centric acquisition. Commercial real estate net charge-offs totaled $6.1 million primarily due to a $4.3 million charge-off recognized on one commercial real estate relationships and $1.9 million related to the Centric acquisition. Net charge-offs in the loans to individuals category totaled $5.0 million for 2023, 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.”

Current wording

Net charge-offs were $31.2 million in 2024 compared to $30.2 million for the year 2023. The most significant credit losses recognized during the year include $11.1 million in charge-offs related to the Centric acquisition. Net charge-offs in the commercial, financial, agricultural and other category totaled $14.7 million, of which $7.0 million were related to the Centric acquisition. Commercial real estate net charge-offs totaled $8.5 million primarily due to a $5.4 million in charge-offs recognized on three commercial real estate relationships and $3.1 million related to the Centric acquisition. Net charge-offs in the loans to individuals category totaled $6.8 million for 2024, 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.”

Previous wording

Provision for credit losses on loans and leases as a percentage of net charge-offs decreased to 23.6% for the year ended December 31, 2023 from 245.5% for the year ended December 31, 2022. This change was primarily driven by the $27.2 million credit loss recorded at acquisition of Centric PCD loans which increased the allowance for credit losses but did not impact the provision for credit losses. As previously noted, $17.0 million of net charge-offs in 2023 were related to the Centric acquisition and would have been provided for as part of the acquisition.

Current wording

Provision for credit losses on loans and leases as a percentage of net charge-offs increased to 103.8% for the year ended December 31, 2024 from 23.6% for the year ended December 31, 2023. This change was primarily driven by the $31.2 million in net charge-offs.

Previous wording

The allowance for credit losses increased $14.8 million from December 31, 2022 to December 31, 2023. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.31% and 1.35% at December 31, 2023 and 2022, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans. Comparing December 31, 2023 to December 31, 2022, the general reserve for performing loans is 1.26% and 1.34%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increased from 2.0% of nonperforming loans at December 31, 2022 to 11.5% of nonperforming loans at December 31, 2023. The allowance for credit losses as a percentage of nonperforming loans was 298.2% and 290.0% at December 31, 2023 and 2022, respectively.

Current wording

The allowance for credit losses increased $1.2 million from December 31, 2023 to December 31, 2024. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.32% and 1.31% at December 31, 2024 and 2023, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans. Comparing December 31, 2024 to December 31, 2023, the general reserve for performing loans is 1.24% and 1.26%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increased from 11.5% of nonperforming loans at December 31, 2023 to 13.0% of nonperforming loans at December 31, 2024. The allowance for credit losses as a percentage of nonperforming loans was 193.5% and 298.2% at December 31, 2024 and 2023, respectively.

Previous wording

As of December 31, 2023, securities available for sale had a fair value of $1.0 billion. Gross unrealized gains were $8.2 million and gross unrealized losses were $125.6 million. The level of gross unrealized losses is directly related to the increase in market interest rates.

Current wording

As of December 31, 2024, securities available for sale had a fair value of $1.1 billion. Gross unrealized gains were $5.4 million and gross unrealized losses were $125.6 million. The level of gross unrealized losses is directly related to the increase in market interest rates.

Previous wording

The securities available for sale portfolio increased $239.7 million, or 27%, as of December 31, 2023 compared to December 31, 2022, as investment securities became more attractive in the higher interest rate environment of 2023. Most of the growth in this portfolio was in the Mortgage-Backed Securities - Commercial category as these securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits.

Current wording

The securities available for sale portfolio increased $126.6 million, or 12%, as of December 31, 2024 compared to December 31, 2023, as deposit growth provided additional liquidity and investment securities provided an opportunity to take advantage of the current interest rate environment. Most of the growth in this portfolio was in the Mortgage-Backed Securities - Commercial category as these securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits.

Previous wording

(b)Yields are calculated on a taxable equivalent basis.

Current wording

(b)Yields are calculated on a taxable equivalent basis, including amortization of premiums or discounts, and represent yield to maturity.

Previous wording

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 40 years and have anticipated average lives to maturity ranging from less than three years to approximately six years.

Current wording

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 41 years and have anticipated average lives to maturity ranging from less than three years to approximately six years.

Previous wording

The available for sale investment portfolio amortized cost increased $239.7 million, or 27%, at December 31, 2023 compared to 2022. Available for sale investment calls or maturities totaled $132.1 million during 2023. 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.

Current wording

The available for sale investment portfolio amortized cost increased $129.3 million, or 11%, at December 31, 2024 compared to 2023. Purchases of available for sale investments totaled $437.3 million during 2024 and calls or maturities totaled $302.5 million. The level of purchases were impacted by liquidity available from increased deposits. 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.

Previous wording

The held to maturity investment portfolio decreased $42.2 million, or 9%, at December 31, 2023 compared to 2022. Held to maturity investment purchases of $0.2 million were offset by the calls or maturities of $41.8 million in investments.

Current wording

The held to maturity investment portfolio decreased $13.4 million, or 3%, at December 31, 2024 compared to 2023. Held to maturity investment purchases of $55.3 million were offset by the calls or maturities of $68.0 million in investments.

Previous wording

At December 31, 2023 and 2022, time deposits of $100 thousand or more totaled $725.1 million and $172.0 million, respectively. Time deposits of $250 thousand or more had remaining maturities as follows as of the end of each year in the two-year period ended December 31:

Current wording

At December 31, 2024 and 2023, time deposits of $100 thousand or more totaled $1,018.3 million and $725.1 million, respectively. Time deposits of $250 thousand or more had remaining maturities as follows as of the end of each year in the two-year period ended December 31:

Previous wording

The estimated total amount of uninsured deposits was $2.5 billion and $2.1 billion at December 31, 2023 and 2022, respectively. Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC.

Current wording

The estimated total amount of uninsured deposits was $2.6 billion and $2.5 billion at December 31, 2024 and 2023, respectively, of which $0.7 billion were secured by pledged investment securities or letters of credit at December 31, 2024 and 2023. Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC.

Previous wording

Short-term borrowings increased $225.1 million, or 60%, from $372.7 million at December 31, 2022 to $597.8 million at December 31, 2023, primarily to fund loan and investment portfolio growth. Long-term debt increased $5.5 million, from $181.2 million at December 31, 2022 to $186.8 million at December 31, 2023. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 14 “Short-term Borrowings,” Note 15 “Subordinated Debentures” and Note 16 “Other Long-term Debt” of the Consolidated Financial Statements.

Current wording

Short-term borrowings decreased $517.7 million, or 87%, from $597.8 million at December 31, 2023 to $80.1 million at December 31, 2024. Long-term debt increased $76.2 million, from $186.8 million at December 31, 2023 to $263.0 million at December 31, 2024. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 15 “Short-term Borrowings,” Note 16 “Subordinated Debentures” and Note 17 “Other Long-term Debt” of the Consolidated Financial Statements.

Previous wording

In addition, see Note 10 “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, 2023. 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, 2023, a reserve for expected credit losses of $7.3 million was recorded for unused commitments and letters of credit.

Current wording

In addition, see Note 10 “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, 2024. 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, 2024, a reserve for expected credit losses of $4.1 million was recorded for unused commitments and letters of credit.

Previous wording

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 $1.2 billion during 2023, and comprised 91% of total liabilities at both December 31, 2023 and December 31, 2022. Proceeds from the sale, maturity and redemption of investment securities totaled $173.9 million during 2023 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.

Current wording

We generate funds to meet our cash flow needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. 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 $485.7 million during 2024, and comprised 95% and 91% of total liabilities at December 31, 2024 and 2023, respectively. Proceeds from the sale, maturity and redemption of investment securities totaled $370.5 million during 2024 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.