FIRST COMMONWEALTH FINANCIAL CORP /PA/

Previous wording

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three months ended March 31, 2026 and 2025, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

Current wording

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three and six months ended June 30, 2026 and 2025, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

Previous wording

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 57 for the three months ended March 31, 2026 and 2025.

Current wording

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 64 and 72 for the six and three months ended June 30, 2026 and 2025, respectively.

Previous wording

For the three months ended March 31, 2026, First Commonwealth had net income of $37.5 million, or $0.37 diluted earnings per share, compared to net income of $32.7 million, or $0.32 diluted earnings per share, in the three months ended March 31, 2025. The increase in net income was primarily the result of a $13.5 million increase in net interest income and $2.1 million increase in noninterest income, offset by a $5.0 million increase in the provision for credit losses and a $4.3 million increase in noninterest expense.

Current wording

For the six months ended June 30, 2026, First Commonwealth had net income of $82.1 million, or $0.81 diluted earnings per share, compared to net income of $66.1 million, or $0.64 diluted earnings per share, in the six months ended June 30, 2025. The increase in net income was primarily the result of a $19.7 million increase in net interest income and $4.3 million increase in noninterest income, offset by a $1.3 million increase in the provision for credit losses and a $2.3 million increase in noninterest expense.

Previous wording

The net interest margin on a fully taxable equivalent basis was 3.92% for the three months ended March 31, 2026 and 3.62% for the three months ended March 31, 2025. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

Current wording

The net interest margin on a fully taxable equivalent basis was 3.97% for the six months ended June 30, 2026 and 3.73% for the six months ended June 30, 2025. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

Previous wording

The taxable equivalent yield on interest-earning assets was 5.65% for the three months ended March 31, 2026, an increase of eight basis points compared to the 5.57% yield for the same period in 2025. The yield on interest-earning assets benefited as the yield on adjustable and fixed rate commercial loans increased 18 basis points and 55 basis points, respectively. Additionally, the yield on fixed rate consumer loans increased by 33 basis points. For the three months ended March 31, 2026, four basis points of the yield on interest-earning assets can be attributed to the recognition of $1.3 million in accretion of purchase accounting marks. For thethree months ended March 31, 2025, accretion of purchase accounting marks contributed$1.2 million, orfive basis points, to the yield on interest-earning assets.

Current wording

The taxable equivalent yield on interest-earning assets was 5.67% for the six months ended June 30, 2026, an increase of two basis points compared to the 5.65% yield for the same period in 2025. The yield on interest-earning assets benefited as the yield on fixed rate commercial loans increased 33 basis points. Additionally, the yield on fixed rate consumer loans increased by 15 basis points. Offsetting these increases were a 73 basis point decrease in consumer lines of credit and a 4 basis point decline in the yield on equipment finance loans. For the six months ended June 30, 2026, five basis points of the yield on interest-earning assets can be attributed to the recognition of $2.7 million in accretion of purchase accounting marks. For thesix months ended June 30, 2025, accretion of purchase accounting marks contributed$3.9 million, orseven basis points, to the yield on interest-earning assets.

Previous wording

The investment portfolio yield decreased 3 basis points in comparison to the prior year primarily due to a decline in market rates. Additionally, the average balance of investments decreased $70.3 million as compared to the three months ended March 31, 2025. Lower interest rates in the three months ended March 31, 2026 compared to the prior year resulted in a 88 basis point decrease in the yield on interest-bearing deposits with banks, while the average balance increased from $76.8 million in 2025 to $207.8 million in 2026.

Current wording

The investment portfolio yield decreased two basis points in comparison to the prior year primarily due to a decline in market rates. Additionally, the average balance of investments decreased $39.7 million as compared to the six months ended June 30, 2025. Lower interest rates in the six months ended June 30, 2026 compared to the prior year resulted in a 93 basis point decrease in the yield on interest-bearing deposits with banks, while the average balance increased from $68.2 million in 2025 to $182.9 million in 2026.

Previous wording

The cost of interest-bearing liabilities decreased to 2.38% for the three months ended March 31, 2026, from 2.67% for the same period in 2025. The cost of interest-bearing deposits decreased 27 basis points and short-term borrowings decreased 72 basis points in comparison to the same period last year. The cost of interest-bearing deposits was impacted by declines in market interest rates as well as changes in the mix of deposits due to growth in money market and time deposits. Comparing the three months ended March 31, 2026 with the comparable period in 2025, average time deposits increased $56.9 million, or 3.2%, with a decrease in the cost of these deposits of 52 basis points. Contributing to the average growth in time deposits was an average of $90.3 million acquired as part of the Center acquisition in the second quarter of 2025. Other interest-bearing deposits increased on average $375.3 million, or 6.5%, compared to the three months ended March 31, 2025 and the cost of these deposits decreased 18 basis points. Average growth in other-interest bearing deposits attributable to the Center acquisition totaled $146.2 million. Compared to the prior period, short-term borrowings decreased an average of$19.0 million and long-term debt decreased an average of$54.4 million compared to the prior period as a result of the payoff of $129.4 million FHLB debt during the first quarter of 2026.

Current wording

The cost of interest-bearing liabilities decreased to 2.35% for the six months ended June 30, 2026, from 2.63% for the same period in 2025. The cost of interest-bearing deposits decreased 25 basis points and short-term borrowings decreased 164 basis points in comparison to the same period last year. The cost of interest-bearing deposits was impacted by declines in market interest rates offset by changes in the mix of deposits with growth in money market and time deposits. Comparing the six months ended June 30, 2026 with the comparable period in 2025, average time deposits increased $39.0 million, or 2.2%, while the cost of these deposits decreased 45 basis points. Contributing to the average growth in time deposits was $90.3 million in balances acquired in the second quarter of 2025 as part of the Center acquisition. The impact of the Center acquisition on average time deposit balances was an increase of $60.0 million when comparing the six-months ended June 30, 2026 to the prior year. Other interest-bearing deposits increased on average $298.8 million, or 5.1%, compared to the six months ended June 30, 2025 and the cost of these deposits decreased 18 basis points. Contributing to the average growth in other interest-bearing deposits was $146.2 million in balances acquired from Center in the second quarter of 2025. The impact of the Center acquisition on average other interest-bearing deposits was an increase of $96.9 million when comparing the six-months ended June 30, 2026 to the prior year. Compared to the prior period, short-term borrowings decreased an average of$69.6 million and long-term debt decreased an average of$93.1 million primarily due to the payoff of $129.4 million FHLB debt during the first quarter of 2026.

Previous wording

For the three months ended March 31, 2026, changes in rates positively impacted net interest income by $7.4 million when compared to the same period in 2025. The yield on interest-earning assets positively impacted net interest income by $1.9 million and the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $5.5 million.

Current wording

For the six months ended June 30, 2026, changes in rates positively impacted net interest income by $10.9 million when compared to the same period in 2025. The yield on interest-earning assets positively impacted net interest income by $0.7 million and the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $10.2 million.

Previous wording

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $6.0 million for the three months ended March 31, 2026, as compared to the same period in 2025. Higher levels of interest-earning assets resulted in an increase of $8.2 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $2.1 million. Average interest-earning assets for the three months ended March 31, 2026 increased $558.1 million, or 5.2%, compared to the same period in 2025. Average loans for the comparable period increased $497.4 million, or 5.5%, and average investments decreased $70.3 million, or 4.4%. Average loans attributable to the Center acquisition for the three months ended March 31, 2026 totaled $292.6 million.

Current wording

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $8.8 million for the six months ended June 30, 2026, as compared to the same period in 2025. Higher levels of interest-earning assets resulted in an increase of $9.8 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $1.0 million. Average interest-earning assets for the six months ended June 30, 2026 increased $337.3 million, or 3.1%, compared to the same period in 2025. Average loans for the comparable period increased $262.3 million, or 2.8%, and average investments decreased $39.7 million, or 2.4%. The Center acquisition, in the second quarter of 2025, increased ending loan balances by $292.6 million. Assuming no change in balances, this resulted in an increase in average balances of $194.0 million when comparing the six months ended June 30, 2026 with the prior year.

Previous wording

Net interest income was positively impacted by a $199.3 million increase in average net free funds for the three months ended March 31, 2026 as compared to the corresponding period in 2025. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The level of net free funds was impacted by growth in average noninterest-bearing demand deposits, as well as higher average shareholders' equity due to retained earnings and stock issued for the Center acquisition. Average noninterest-bearing demand deposits for thethree months ended March 31, 2026 increased$86.4 million, or 3.8%, compared to the same period in 2025, while interest-bearing demand deposits increased $375.3 million, or 6.5%.

Current wording

Net interest income was positively impacted by a $162.2 million increase in average net free funds for the six months ended June 30, 2026 as compared to the corresponding period in 2025. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The level of net free funds was impacted by growth in average noninterest-bearing demand deposits, as well as higher average shareholders' equity due to retained earnings and stock issued for the Center acquisition. Average noninterest-bearing demand deposits for thesix months ended June 30, 2026 increased$67.9 million, or 3.0%, compared to the same period in 2025.

Previous wording

The following is an analysis of the average balance sheet and net interest income on a fully taxable equivalent basis for the three months ended March 31:

Current wording

The following is an analysis of the average balance sheet and net interest income on a fully taxable equivalent basis for the six months ended June 30:

Previous wording

Total provision expense for the three months ended March 31, 2026, increased $5.0 million compared to the three months ended March 31, 2025. Included in the provision for credit losses for the three months ended March 31, 2026 is $7.4 million in reserves related to two individually analyzed time and demand loans and $2.2 million in reserves for one individually analyzed multifamily real estate loan, all of which were moved to nonaccrual during the first quarter of 2026. Provision expense for the period was also impacted by $0.7 million recognized as charge-offs for two commercial loan relationships moved to held for sale.

Current wording

Total provision expense for the six months ended June 30, 2026, increased $1.3 million compared to the six months ended June 30, 2025. Included in the provision for credit losses for the six months ended June 30, 2026 is $4.9 million in reserves related to two individually analyzed time and demand relationships and $2.1 million in reserves for one individually analyzed multifamily real estate loan, all of which were moved to nonaccrual during the first six months of 2026. Provision expense for the period was also impacted by growth in the equipment finance portfolio and a $3.4 million provision related to a time and demand loan which was moved to nonaccrual in 2026 and subsequently charged-off. In addition, provision expense was impacted by charge-offs totaling $0.8 million for three commercial loan relationships moved to held for sale.

Previous wording

Also impacting provision expense in the three months ended March 31, 2026 was $0.8 million in negative provision expense related to the reserve for off-balance sheet credit exposures. The level of provision for off-balance sheet exposure in 2026 is primarily due to decreased commercial and residential construction commitments.

Current wording

Also impacting provision expense in the six months ended June 30, 2026 was $1.6 million in negative provision expense related to the reserve for off-balance sheet credit exposures. The level of provision for off-balance sheet exposure in 2026 is primarily due to decreased commercial and residential construction commitments.

Previous wording

The provision expense for the three months ended March 31, 2025 is primarily attributed to growth in equipment finance and automobile and recreational vehicles loans as well as an increase in the provision for off-balance sheet commitments due to higher balances of commercial construction loan commitments.

Current wording

The provision expense for the six months ended June 30, 2025 was impacted by $3.4 million recognized in the second quarter of 2025 as the day-1 non-PCD provision expense resulting from the Center acquisition. Additionally, provision expense in 2025 was impacted by growth in equipment finance and automobile and recreational vehicles loans as well as an increase in the provision for off-balance sheet commitments due to a higher level of commercial construction commitments.

Previous wording

The allowance for credit losses was $129.2 million, or 1.37%, of total loans and leases outstanding at March 31, 2026, compared to $125.8 million, or 1.32%, at December 31, 2025 and $119.9 million, or 1.32%, at March 31, 2025. Nonperforming loans as a percentage of total loans and leases increased to 0.98% at March 31, 2026 from 0.65% as of March 31, 2025 and 0.97% at December 31, 2025. The allowance to nonperforming loan ratio was 141.70%, 137.07% and 201.89% as of March 31, 2026, December 31, 2025 and March 31, 2025, respectively.

Current wording

The allowance for credit losses was $127.4 million, or 1.35%, of total loans and leases outstanding at June 30, 2026, compared to $125.8 million, or 1.32%, at December 31, 2025 and $133.0 million, or 1.39%, at June 30, 2025. Nonperforming loans as a percentage of total loans and leases decreased to 0.86% at June 30, 2026 from 1.04% as of June 30, 2025 and 0.97% at December 31, 2025. The allowance to nonperforming loan ratio was 156.08%, 137.07% and 133.62% as of June 30, 2026, December 31, 2025 and June 30, 2025, respectively.

Previous wording

Total noninterest income for the three months ended March 31, 2026 increased $2.1 million, or 9%, compared to the three months ended March 31, 2025. This is primarily the result of an $0.8 million increase in the gain on sale of mortgage loans and a $0.8 million increase in the gain on sale of other loans and assets. Included in gain on sale of other loans and assets for the three months ended March 31, 2026 was $0.4 million related to changes in the value of loans held for sale. Trust income increased $0.4 million due to revenue for assets under management and income from bank owned life insurance increased $0.3 million largely due to a stable value wrap restructure completed in the first quarter of 2025. Offsetting these increases, was a decrease of $0.7 million in swap fee income as a result of lower volume for new interest rate swaps entered into by our commercial loan customers.

Current wording

Total noninterest income for the six months ended June 30, 2026 increased $4.3 million, or 9%, compared to the six months ended June 30, 2025. This is primarily the result of an $1.3 million increase in the gain on sale of mortgage loans, a $0.6 million increase in the gain on sale of other loans and assets and an $0.8 million gain on the early redemption of subordinated debt. Included in gain on sale of other loans and assets for the six months ended June 30, 2026 was $0.4 million related to changes in the value of loans held for sale. Trust income increased $0.9 million due to revenue for assets under management and income from bank owned life insurance increased $0.5 million due to claims received as well as the impact of a stable value wrap restructure completed in the first quarter of 2025. Offsetting these increases, was a decrease of $0.8 million in swap fee income as a result of lower volume for new interest rate swaps entered into by our commercial loan customers.

Previous wording

Other items impacting noninterest income in the three months ended March 31, 2025 include gains on the sale of VISA shares of $5.1 million, offset by net security losses of $5.1 million, resulting from the sale of available for sale securities that were sold in order to reinvest into higher yielding investments.

Current wording

Items impacting noninterest income in the six months ended June 30, 2025 include gains on the sale of VISA shares of $5.1 million, offset by net security losses of $5.1 million, resulting from the sale of available for sale securities that were sold in order to reinvest into higher yielding investments.

Previous wording

Noninterest expense increased $4.3 million, or 6%, for the three months ended March 31, 2026 compared to the same period in 2025. This increase is primarily the result of a $2.5 million increase in salaries and benefits expense. Contributing to the higher salary expense in 2026 wasa higher number of full time equivalent employees, partially due to the Center acquisition. The number of full time equivalent employees totaled 1,538 at March 31, 2025 and 1,592 at March 31, 2026.

Current wording

Noninterest expense increased $2.3 million, or 2%, for the six months ended June 30, 2026 compared to the same period in 2025. This increase is primarily the result of a $4.6 million increase in salaries and benefits expense. Contributing to the higher salary expense in 2026 wasa higher number of full time equivalent employees, partially due to the Center acquisition. The number of full time equivalent employees totaled 1,562 at June 30, 2025 and 1,589 at June 30, 2026.

Previous wording

Furniture and equipment expense increased $0.6 million, primarily due to higher software related expenses. The decrease in other professional fees and services is a result of services and advisors contracted for several areas in the prior period, none of which were individually material.

Current wording

The decrease of $0.8 million in other professional fees and services is a result of services and advisors contracted for several areas in the prior period, none of which were individually material. In addition, merger and acquisition related expenses were $4.1 million in the first six months of 2025 due to the Center acquisition with only $0.2 million recognized in the current period.

Previous wording

The provision for income taxes increased $1.3 million for the three months ended March 31, 2026, compared to the corresponding period in 2025, primarily due to the higher level of income before tax.

Current wording

The provision for income taxes increased $4.4 million for the six months ended June 30, 2026, compared to the corresponding period in 2025, primarily due to the higher level of income before tax.

Previous wording

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an effective tax rate of 20.5% and 20.3% for the three months ended March 31, 2026 and 2025, respectively.

Current wording

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an effective tax rate of 20.6% and 20.5% for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

As of March 31, 2026, our deferred tax assets totaled $43.0 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved forecasts, evaluation of historical earnings levels and consideration of potential tax strategies. If future events differ from our current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.

Current wording

As of June 30, 2026, our deferred tax assets totaled $43.2 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved forecasts, evaluation of historical earnings levels and consideration of potential tax strategies. If future events differ from our current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.

Previous wording

For the three months ended March 31, 2026, the Company’s return on average equity was 9.75% and its return on average assets was 1.25%, compared to 9.28% and 1.14%, respectively, for the three months ended March 31, 2025.

Current wording

For the three months ended June 30, 2026, the Company’s return on average equity was 11.44% and its return on average assets was 1.47%, compared to 8.97% and 1.11%, respectively, for the three months ended June 30, 2025.

Previous wording

Net interest income, on a fully taxable equivalent basis, was $109.3 million in the first three months of 2026, compared to $95.9 million for the same period in 2025. The increase in net interest income can be attributedtoa 29 basis point decrease in the cost of interest-bearing liabilities and an 8 basis point increase in the yield on interest-earning assets. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 81.6% and 80.9% for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Net interest income, on a fully taxable equivalent basis, was $112.8 million in the second quarter of 2026, compared to $106.6 million for the same period in 2025. The increase in net interest income can be attributedtoa 28 basis point decrease in the cost of interest-bearing liabilities offset by a 5 basis point decrease in the yield on interest-earning assets. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 80.6% and 81.1% for the three months ended June 30, 2026 and 2025, respectively.

Previous wording

Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first three months of 2026, the sale, maturity and redemption of investment securities provided $100.0 million in liquidity. These funds contributed to the liquidity available to originate loans, purchase investment securities and fund depositor withdrawals.

Current wording

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs, with cost-effective funding. We generate funds to meet these needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. During the first six months of 2026, the sale, maturity and redemption of investment securities provided $198.8 million in liquidity. These funds contributed to the liquidity available to originate loans, purchase investment securities and fund depositor withdrawals.

Previous wording

Our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program is part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of March 31, 2026, the outstanding CDARS balance of $15.0 million carried an average weighted rate of 2.95% and an average original term of 322 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

Current wording

Our participation in the Certificate of Deposit Account Registry Services (“CDARS”) program is part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources. As of June 30, 2026, the outstanding CDARS balance of $14.4 million carried an average weighted rate of 2.96% and an average original term of 327 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

Previous wording

During the first three months of 2026, total deposits increased $158.9 million. Interest-bearing demand and savings deposits increased $201.0 million, time deposits decreased $39.5 million, and noninterest-bearing demand deposits decreased $2.6 million.

Current wording

During the first six months of 2026, total deposits increased $9.1 million. Interest-bearing demand and savings deposits increased $126.6 million, time deposits decreased $158.3 million, and noninterest-bearing demand deposits decreased $40.8 million.

Previous wording

The estimated total of uninsured deposits was $3.0 billion and $2.9 billion at March 31, 2026 and December 31, 2025, respectively, of which $0.8 billion were secured by pledged investment securities or letters of credit as of both March 31, 2026 and December 31, 2025. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.

Current wording

The estimated total of uninsured deposits was $2.8 billion and $2.9 billion at June 30, 2026 and December 31, 2025, respectively, of which $0.8 billion were secured by pledged investment securities or letters of credit as of both June 30, 2026 and December 31, 2025. Uninsured amounts are estimated based on known account relationships for each depositor and insurance guidelines provided by the FDIC.

Previous wording

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 0.71 and 0.70 at March 31, 2026 and December 31, 2025, 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.

Current wording

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 0.70 at both June 30, 2026 and December 31, 2025. 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.

Previous wording

The Company evaluates its potential interest rate sensitivity by utilizing several interest rate scenarios that incorporate both rising and declining rates. Results of these scenarios are impacted by variables that include the current level of interest rates, product characteristics such as floors and ceilings, the frequency with which variable rate products reset their rates, and projected pricing changes for non-maturity deposits. For example, the results in a declining rate scenario could be affected by the model's use of an assumed interest rate floor of zero. For the three months ended March 31, 2026 and 2025, the cost of our interest-bearing liabilities averaged 2.38% and 2.67%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.65% and 5.57%, respectively.

Current wording

The Company evaluates its potential interest rate sensitivity by utilizing several interest rate scenarios that incorporate both rising and declining rates. Results of these scenarios are impacted by variables that include the current level of interest rates, product characteristics such as floors and ceilings, the frequency with which variable rate products reset their rates, and projected pricing changes for non-maturity deposits. For example, the results in a declining rate scenario could be affected by the model's use of an assumed interest rate floor of zero. For the six months ended June 30, 2026 and 2025, the cost of our interest-bearing liabilities averaged 2.35% and 2.63%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.67% and 5.65%, respectively.

Previous wording

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 $7.3 million at March 31, 2026 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

Current wording

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 $6.6 million at June 30, 2026 and is classified in "Other liabilities" on the unaudited Consolidated Statements of Financial Condition.

Previous wording

Nonperforming loans and leases, including loans held for sale, increased $0.6 million to $92.3 million at March 31, 2026, compared to $91.8 million at December 31, 2025. During the first three months of 2026, a total of $24.6 million in loans were moved to a nonperforming status. This total includes three commercial relationships totaling $20.5 million. As of March 31, 2026, reserves of $9.6 million are included in the allowance for credit losses for these relationships. Offsetting the additions to nonperforming was the transfer of two commercial relationships back to accrual status totaling $8.6 million, releasing $2.3 million in reserves from the allowance for credit losses. Additionally, two commercial relationships totaling $5.4 million were transferred to held for sale, recognizing $0.6 million in charge-offs and a $3.2 million commercial relationship was resolved with the Company accepting $1.3 million as satisfaction for the loan balance, recognizing a charge-off of $1.9 million, for which $1.7 million was provided for at December 31, 2025. Also impacting nonperforming loan balances in the first quarter of 2026, was a $1.7 million paydown of a $2.5 million dealer floor plan relationship with the Company recognizing a previously provided for charge-off of $0.7 million. Charge-offs for the three months ended March 31, 2026 totaled $9.4 million. Subsequent to March 31, 2026, two individually analyzed nonaccrual commercial credits, with an outstanding balance of $5.6 million and associated reserves of $3.3 million, were sold or paid off. This resulted in an additional chargeoff of $0.1 million in the second quarter of 2026.

Current wording

Nonperforming loans and leases, including loans held for sale, decreased $10.1 million to $81.6 million at June 30, 2026, compared to $91.8 million at December 31, 2025. During the six months ended June, 30, 2026, a total of $33.7 million in loans were moved to a nonperforming status. This total includes three commercial relationships totaling $32.5 million. As of June 30, 2026, reserves of $8.2 million are included in the allowance for credit losses for these relationships. Offsetting the additions to nonperforming was the transfer of two commercial relationships back to accrual status totaling $8.6 million, releasing $2.3 million in reserves from the allowance for credit losses. Additionally, two commercial relationships totaling $5.2 million were transferred to held for sale, recognizing $0.6 million in charge-offs, and a $3.2 million commercial relationship was resolved with the Company accepting $1.3 million as satisfaction for the loan balance, recognizing a charge-off of $1.9 million, for which $1.7 million was provided for at December 31, 2025. Also impacting nonperforming loan balances in the first half of 2026, was a $1.9 million paydown of a $2.5 million dealer floor plan relationship with the Company recognizing a previously provided for charge-off of $0.7 million. In addition, four large nonperforming commercial relationships totaling $6.6 million paid off during the six-months ended June 30, 2026. Charge-offs for the six months ended June 30, 2026 totaled $22.4 million.

Previous wording

The allowance for credit losses as a percentage of nonperforming loans was 141.70% as of March 31, 2026, compared to 137.07% at December 31, 2025, and 201.89% at March 31, 2025. The amount of individually analyzed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals. The allowance for credit losses includes specific allocations of $14.0 million and general reserves of $115.2 million as of March 31, 2026. Specific reserves increased $4.1 million in comparison to December 31, 2025 and $6.1 million from March 31, 2025. The increase in specific reserves compared to December 31, 2025 is primarily due to specific reserves applied to individually analyzed loans moved to nonperforming during the quarter.

Current wording

The allowance for credit losses as a percentage of nonperforming loans was 156.08% as of June 30, 2026, compared to 137.07% at December 31, 2025, and 133.62% at June 30, 2025. The amount of individually analyzed reserves included in the allowance for nonperforming loans and leases was determined by using fair values obtained from current appraisals. The allowance for credit losses includes specific allocations of $10.3 million and general reserves of $117.1 million as of June 30, 2026. Specific reserves increased $0.5 million in comparison to December 31, 2025 and decreased $3.8 million from June 30, 2025. The increase in specific reserves compared to December 31, 2025 is primarily due to specific reserves applied to individually analyzed loans moved to nonperforming during the second quarter.

Previous wording

Criticized loans totaled $284.6 million at March 31, 2026 and represented 3.0% of the loan portfolio. The level of criticized loans increased as of March 31, 2026 when compared to December 31, 2025, by $17.5 million, or 7%. Classified loans totaled $136.9 million at March 31, 2026 compared to $139.4 million at December 31, 2025, a decrease of $2.5 million, or 2%. The higher level of classified loans can be attributed to changes in nonperforming loans as previously discussed.

Current wording

Criticized loans totaled $286.5 million at June 30, 2026 and represented 3.0% of the loan portfolio. The level of criticized loans increased as of June 30, 2026 when compared to December 31, 2025, by $19.3 million, or 7%. Classified loans totaled $148.4 million at June 30, 2026 compared to $139.4 million at December 31, 2025, an increase of $9.0 million, or 6%.

Previous wording

The allowance for credit losses was $129.2 million at March 31, 2026, or 1.37% of total loans and leases outstanding, compared to 1.32% reported at December 31, 2025, and 1.32% at March 31, 2025. General reserves, or the portion of the allowance related to loans that were not individually analyzed, as a percentage of performing loans were 1.75% at March 31, 2026 compared to 1.22% at December 31, 2025 and 1.24% at March 31, 2025.

Current wording

The allowance for credit losses was $127.4 million at June 30, 2026, or 1.35% of total loans and leases outstanding, compared to 1.32% reported at December 31, 2025, and 1.39% at June 30, 2025. General reserves, or the portion of the allowance related to loans that were not individually analyzed, as a percentage of performing loans were 1.24% at June 30, 2026 compared to 1.22% at December 31, 2025 and 1.26% at June 30, 2025.

Previous wording

(a)For the three-month period ended.

Current wording

(a)For the six-month period ended.

Previous wording

During the three months ended March 31, 2026, loans decreased $74.2 million compared to balances outstanding at December 31, 2025.

Current wording

During the six months ended June 30, 2026, loans decreased $40.8 million compared to balances outstanding at December 31, 2025.

Previous wording

Commercial, financial, agricultural and other loans increased $16.9 million, or 0.8%; $53.5 million of growth occurred in the equipment finance portfolio offset by a $29.6 million decrease in the time and demand portfolio. Real estate construction loans decreased $26.5 million, or 5.7%, due to commercial real estate projects that were completed and moved to permanent funding. Residential real estate decreased $8.7 million, or 0.4%, primarily due to a decline in residential first lien loans. Commercial real estate loans decreased $33.3 million, or 1.0%, as a result of decline in loans secured by non-owner occupied commercial real estate. Loans to individuals decreased $22.5 million, or 1.5%, primarily due to a decrease in the automobile and recreational vehicles portfolio.

Current wording

Commercial, financial, agricultural and other loans increased $26.4 million, or 1.3%. Within this category, $91.5 million of growth occurred in the equipment finance portfolio, offset by a $74.3 million decrease in the time and demand portfolio. Real estate construction loans increased $23.9 million, or 5.2%, due to growth in commercial real estate projects. Residential real estate loans increased $7.9 million, or 0.3%, primarily due to growth in home equity loans. Commercial real estate loans decreased $98.3 million, or 3.1%, as a result of decline in loans secured by non-owner occupied commercial real estate. Loans to individuals decreased $0.6 million, or 0.04%, primarily due to a decrease in consumer credit card and consumer other loans.

Previous wording

The following tables represent our commercial real estate portfolio by type of property securing the credit as of March 31, 2026. Total non-pass commercial real estate loans increased by $19.8 million to $147.3 million when compared to December 31, 2025.

Current wording

The following tables represent our commercial real estate portfolio by type of property securing the credit as of June 30, 2026. Total non-pass commercial real estate loans increased by $11.1 million to $138.6 million when compared to December 31, 2025.

Previous wording

March 31, 2026 is $0.9 million. Within the office portfolio, exposures over $1.0 million have an average debt service coverage ratio of 1.46x, which exceeds our internal guidelines of 1.25x to 1.50x, depending on property class. Additionally, for loans with exposure over $1.0 million, the office portfolio has a weighted average loan to value of 45.0% compared to internal guidelines of 60-75%, depending on property class. Our current measure is based off of the most recent appraisal on file, the majority of which are from origination.

Current wording

The office portfolio comprises 14% of total commercial real estate loans and 24% of total commercial real estate non-pass loans. The average loan commitment size for the office portfolio is $0.9 million and the average outstanding balance as of June 30, 2026 is $0.9 million. Within the office portfolio, exposures over $1.0 million have an average debt service coverage ratio of 1.51x, which exceeds our internal guidelines of 1.25x to 1.50x, depending on property class. Additionally, for loans with exposure over $1.0 million, the office portfolio has a weighted average loan to value of 45.0% compared to internal guidelines of 60-75%, depending on property class. Our current measure is based off of the most recent appraisal on file, the majority of which are from origination.