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What changed in FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+335 added−290 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 2023 10-K

335 paragraphs added · 290 removed · 219 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

62 edited+35 added−8 removed142 unchanged
Biggest changeThe 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 Volcker Rule.
Biggest changeThe statutory provision is commonly called the “Volcker Rule.” Banks with less than $10 billion in total consolidated assets are exempt from the Volcker Rule. FCB's total assets exceeded $10 billion as of December 31, 2023.
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 2016, we acquired 13 branches from FirstMerit Bank, National Association, in Canton-Massillon and Ashtabula, Ohio and in 2017, we acquired DCB Financial Corp., and its banking subsidiary The Delaware County Bank and Trust Company with nine full-service banking offices in the Columbus, Ohio MSA.
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.
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.
We also support our employees by offering several resources. An employee assistance program connects employees with resources to help them in certain life situations, such as personal counselling, legal services, and adoption.
We support our employees by offering several resources. An employee assistance program connects employees with resources to help them in certain life situations, such as personal counselling, legal services, and adoption.
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 12 Table of Contents 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.
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.
Our health plan is structured with a tiered premium approach in which 35% 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.
Our health plan is structured with a tiered premium approach in which 32% 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.
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 20%, by principal amount, of our commercial real estate loans involve owner-occupied properties.
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 24%, by principal amount, of our commercial real estate loans involve owner-occupied properties.
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.
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 9 Table of Contents 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.
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.
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 16 Table of Contents customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
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.
Under 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.
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. • We connected with the Ohio Banker’s League Summer Bank Institute.
Through a structured training program, BankWork$ prepares people from underserved communities for primarily entry-level, branch roles in banking. First Commonwealth actively participates by engaging in classroom discussions with students, mock interviews, attending job fairs and hiring graduates. • We connected with the Ohio Banker’s League Summer Bank Institute.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 14 Table of Contents 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.
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.
They receive healthy living emails and resources with helpful wellness tips, success stories, and inspirations to guide them on their own wellness journeys. A Concierge Care program is available to help healthcare members navigate the complexities of healthcare. They work to coordinate care needs with doctors, caregivers and pharmacists.
They receive healthy living emails and resources with helpful wellness tips, success stories, and inspirations to guide them on their own wellness journeys. A Concierge Care program is available to help 8 Table of Contents healthcare members navigate the complexities of healthcare. They work to coordinate care needs with doctors, caregivers and pharmacists.
A 13 Table of Contents 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.
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.
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.
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. 10 Table of Contents SEC Regulations .
Talent Development Guided by executive leadership, our Strategic and Inspired Leadership ("SAIL") program is in place to strengthen our senior leadership. Over 150 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, leadership development, employee engagement and learning & growth opportunities.
Talent Development Guided by executive leadership, our Strategic and Inspired Leadership ("SAIL") program is in place to strengthen our senior leadership. About 200 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, leadership development, employee engagement and learning & growth opportunities.
We also offer an interest-free advance up to the healthcare member's deductible and out-of-pocket limits with payroll deduction payback options. In 2022, we introduced our paid maternity leave benefit that provides ten weeks and our paid parental leave that provides three weeks of fully paid leave for full time employees with more than one year of service.
We also offer an interest-free advance up to the healthcare member's deductible and out-of-pocket limits with payroll deduction payback options. We offer a paid maternity leave benefit that provides ten weeks and our paid parental leave that provides three weeks of fully paid leave for full time employees with more than one year of service.
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 2022, 75.6% of our employees completed the annual survey.
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 2023, 75.8% of our employees completed the annual survey.
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.
Federal bank regulators, state attorneys general and 11 Table of Contents 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.
Our employment turnover for 2022 was calculated at 28.1%, 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.
Our employment turnover for 2023 was calculated at 28.6%, 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.
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.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. 15 Table of Contents Office of Foreign Assets Control Regulation The U.S.
First Commonwealth believes that, as of December 31, 2022, FCB was a “well-capitalized” bank as defined by the FDIA.
First Commonwealth believes that, as of December 31, 2023, FCB was a “well-capitalized” bank as defined by the FDIA.
Our focus on D&I has produced meaningful progress in several scorecard categories. As of December 31, 2022, racial minorities comprised 7% of the workforce. Racial minorities and women comprised 5% and 50.8%, 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.
Our focus on D&I has produced meaningful progress in several scorecard categories. As of December 31, 2023, racial minorities comprised 8% of the workforce. Racial minorities and women comprised 4.8% and 50.2%, 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.
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 with approximately 28% of our workforce permanently telecommuting as of December 31, 2022.
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 with approximately 29% of our workforce permanently telecommuting as of December 31, 2023.
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. 9 Table of Contents Banking Holding Company Activities.
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 CRA and its compliance with fair housing and other consumer protection laws and the effectiveness of the subject organizations in combating money laundering activities.
We also partner with a wellness vendor to provide our healthcare members personal access to their own Health Advisor to coordinate care, and to have free access to nutrition counseling, fitness and financial coaching, mental and emotional health 8 Table of Contents specialists, and condition management services.
We partner with a wellness vendor to provide our healthcare members personal access to their own Health Advisor to coordinate care, and to have free access to nutrition counseling, fitness and financial coaching, mental and emotional health specialists, and condition management services.
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”).
The current standards are known as the "Basel III Capital Rules." These 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”).
As of December 31, 2022, FCB could pay dividends to First Commonwealth of $294.3 million without reducing its capital levels below "well capitalized" levels and without the approval of the Pennsylvania Department of Banking and Securities. Community Reinvestment.
As of December 31, 2023, FCB could pay dividends to First Commonwealth of $282.6 million without reducing its capital levels below "well capitalized" levels and without the approval of the Pennsylvania Department of Banking and Securities. Community Reinvestment .
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.
The relevant 13 Table of Contents 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.
Fox works closely with our Regional Community Reinvestment Act Officers and Community Engagement Manager to deepen the connections with our company and communities, especially our Pittsburgh and Central Ohio markets. Ms. Fox serves as the co-chair of our Diversity & Inclusion Committee, along with T. Michael Price, CEO.
Fox works closely with our Regional Community Reinvestment Act Officers and Community Engagement Manager to deepen the connections with our company and communities across our footprint. Ms. Fox serves as the co-chair of our Diversity & Inclusion Committee, along with T. Michael Price, CEO.
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 2022, there were a total of 136 participants, including 80 women and 17 racial minorities.
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 2023, there were a total of 140 participants, including 94 women and 10 racial minorities.
The groups' purpose is to provide support in personal and career development, offer diverse perspectives into the workplace and create a safe space where employees can bring their authentic selves to the table. • Our strong partnership with BankWork$ continued in our Pittsburgh market.
We’ve also branded each group to accentuate their own individual identities. The groups' purpose is to provide support in personal and career development, offer diverse perspectives into the workplace and create a safe space where employees can bring their authentic selves to the table. • Our strong partnership with BankWork$ continued in our Pittsburgh market.
Our talent acquisition priority is to foster the development of internal talent and to provide career advancement opportunities to our employees. In 2022, we promoted 200 employees, of whom 65% were female and 6% were self-identified minorities.
Our talent acquisition priority is to foster the development of internal talent and to provide career advancement opportunities to our employees. In 2023, we promoted 143 employees, of whom 64% were female and 2% were self-identified minorities.
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.
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.
Lastly, 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.
Lastly, our employees support each other through Hearts2Hands, an employee-funded program that provides financial assistance to employees who experience hardships. Culture and Engagement The soul of our culture is our mission to improve the financial lives of our neighbors and their businesses.
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.
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.
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.
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.
At December 31, 2022, we held $8.0 billion of total deposits, which consisted of $2.7 6 Table of Contents 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.
At December 31, 2023, we held $9.2 billion of total deposits, which consisted of $2.4 billion, or 26%, in non-interest bearing checking accounts, $5.5 billion, or 60%, in interest-bearing checking accounts, money 6 Table of Contents market and savings accounts, and $1.3 billion, or 14%, in CDs and IRAs.
The Bank also operates a network of 132 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.
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.
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. 10 Table of Contents Bank Regulation FCB is a state bank chartered under the Pennsylvania Banking Code and is not a member of the FRB.
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.
Risk Factors for a further discussion of risks related to cybersecurity. 15 Table of Contents 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.
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.
Human Capital Resources Workforce Composition and Demographics At December 31, 2022, First Commonwealth and its subsidiaries employed 1,403 full-time employees and 74 part-time employees with 636 exempt and 841 non-exempt employees. The average age of the workforce is 43.6 years and the average tenure is 7.9 years. Our workforce is 66% female.
Human Capital Resources Workforce Composition and Demographics At December 31, 2023, First Commonwealth and its subsidiaries employed 1,437 full-time employees and 67 part-time employees with 707 exempt and 797 non-exempt employees. The average age of the workforce is 44.4 years and the average tenure is 7.9 years. Our workforce is 67% female.
Although all institutions are subject to rules adopted by the CFPB and 11 Table of Contents 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.
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, including FCB. State authorities are responsible for monitoring our compliance with all state consumer laws.
ITEM 1. Business Overview 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").
ITEM 1. Business Overview First Commonwealth Financial Corporation (“First Commonwealth,” the “Company” or “we”) is a financial holding company headquartered in Indiana, Pennsylvania. First Commonwealth's operating subsidiaries include First Commonwealth Bank ("FCB" or the "Bank"), First Commonwealth Insurance Agency, Inc. ("FCIA") and FRAMAL. We provide a diversified array of consumer and commercial banking services through our bank subsidiary, FCB.
We provide corporate support for the United Way, including an employee campaign which exceeded our 2022 goal with employee contributions of $92,000, a 13.9% increase over 2021. With the company match, that meant $184,000 donated to United Way chapters throughout our footprint.
We provide corporate support for the United Way, including an employee campaign which exceeded our 2023 goal with employee contributions of $95,500. With the company match, a total of $191,000 was donated to United Way chapters throughout our footprint.
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.
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.
More than 50% of that giving is CRA eligible meaning that it’s directed into low to moderate income communities where we anticipate it’s needed the most. That percentage in 2021 was 35%.
More than 50% of that giving is Community Reinvestment Act ("CRA") eligible, which means that it is directed into low to moderate income communities where we anticipate it is needed the most.
The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC's amended restoration plan. Capital Requirements First Commonwealth and FCB are each required to comply with applicable capital adequacy standards established by the FRB.
The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC's amended restoration plan.
Our employees provided 12,000 volunteer hours including about 600 hours of financial education reaching more than 7,000 participants with topics ranging from financial literacy for elementary age children, to preparing for retirement and fraud awareness for retired individuals.
Our employees provided more than 13,000 volunteer hours and participated in 500 financial education sessions with topics ranging from financial literacy for elementary age children, to preparing for retirement and fraud awareness for retired individuals. In 2023, we achieved a milestone of 100,000 participants reached with financial education.
The following is a summary of D&I initiatives in 2022: • We distributed regional and line of business diversity scorecards in each of our five regions and to our executive officers for their units to increase accountability for diversity in our workforce. • In addition to our already established African American employee resource group, we created groups to include our Hispanic Heritage and LGBTQ employee base.
The following is a summary of D&I initiatives in 2023: • We distributed regional and line of business diversity scorecards in each of our five regions and to our executive officers for their units to increase accountability for diversity in our workforce. • We expanded our Employee Resource Groups (ERGs) to a total of five, adding Military focuses and Parenting & Caregiving groups.
See Note 24 “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.
See Note 24 “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. 14 Table of Contents 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").
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 part of this strategy, we have opened fourteen de novo branches since 2005, all of which were in the greater Pittsburgh area.
At December 31, 2022, we had total assets of $9.8 billion, total loans of $7.7 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.
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.
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.
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.
We earned approximately $27.6 million in card related interchange income during the 2022 fiscal year. If we had not qualified for this exemption, we estimate that our interchange income would decrease by $14.1 million.
We earned approximately $28.6 million in card-related interchange income during the 2023 fiscal year. If we had not qualified for this exemption, we estimate that our interchange income would decrease by $14.9 million. First Commonwealth's total assets exceeded $10 billion as of December 31, 2023, and as such, we are subject to the interchange fee cap beginning July 1, 2024.
Several of our employees were recognized for their work advancing D&I, including Jane Grebenc, Chief Revenue Officer and Bank President, who was recognized by PA Business Central Top Women CEO’s. T. Michael Price, CEO, received the PA Bankers Association Diversity, Equity & Inclusion Changemaker Award.
Several of our employees were recognized for their work advancing D&I, including Jane Grebenc, Chief Revenue Officer and Bank President, who was recognized by PA Business Central as a Top Female C-Suite leader. We had two female employees recognized by the PA Banker’s Association as Future Under 40 leaders.
We were the #2 SBA lender across all of Pennsylvania and a top SBA lender in our Ohio markets. Based on employee feedback, First Commonwealth was named a Top Workplace in the Pittsburgh area in 2022 for the fourth consecutive year. In 2022, First Commonwealth supported our communities with more than $1,900,000 in community giving reaching nearly 700 different organizations.
And, based on employee feedback, First Commonwealth was named a Top Workplace in the Pittsburgh area in 2023 for the fifth consecutive year and in the Cleveland area for the first time. In 2023, First Commonwealth supported our communities with more than $2.0 million in community giving.
On August 30, 2022, we entered into an agreement and plan of merger to acquire Centric Financial Corporation ("Centric") and its banking subsidiary Centric Bank, which operates branches located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, Pennsylvania, and loan production offices in Lancaster and Devon, Pennsylvania. We completed the acquisition of Centric on January 31, 2023.
In January 2023, we acquired Centric Financial Corporation ("Centric") and its banking subsidiary Centric Bank, which operated branches located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, Pennsylvania, and loan production offices in Lancaster and Devon, Pennsylvania. We have also focused on organic growth, improving the reach of our franchise and the breadth of our product offering.
Other employees received external recognitions, including, PA Bankers Association Young Professional Champion, and PA Business Central Top 100 People recognition. 7 Table of Contents Talent Attraction and Retention Our employees are key to the success of delivering our mission as an organization and achieving our financial targets.
Patricia Husic was recognized by City & State Pennsylvania with their Power of Diversity recognition. T. Michael Price, CEO, received the PA Bankers Association Diversity, Equity & Inclusion Changemaker Award. 7 Table of Contents Talent Attraction and Retention Our employees are key to the success of delivering our mission as an organization and achieving our financial targets.
We will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time. Consumer Financial Protection. We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.
At December 31, 2022, the Bank operated 119 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.
At December 31, 2023, the Bank operated 126 community banking offices in 30 counties throughout western and central Pennsylvania and throughout Ohio, as well as commercial lending operations in Harrisburg, Pennsylvania, and Canton, Cleveland, Columbus, Canfield and Hudson, Ohio. The Bank also operates a network of 138 automated teller machines, or ATMs, at various branch offices and offsite locations.
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 2022 for the fourth consecutive year and earned the #1 SBA lender ranking in the Pittsburgh district for the second consecutive year.
The five behaviors are to put customers first, be relentless, inspire confidence, champion simplicity and obsess with yes. In 2023, both our Customer Satisfaction Score and our Net Promoter Score (NPS) were above the targets we set for ourselves and above industry standards.
Removed
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.
Added
We also provide trust and wealth management services through FCB and offer insurance products through FCIA. At December 31, 2023, we had total assets of $11.5 billion, total loans of $9.0 billion, total deposits of $9.2 billion and shareholders’ equity of $1.3 billion.
Removed
As a result of our prior acquisitions and de novo strategy, FCB operates 47 branches and a corporate banking center in the Pittsburgh metropolitan statistical area ("MSA") and currently ranks tenth in deposit market share in the Pittsburgh MSA.
Added
At December 31, 2023, uninsured deposits totaled 27% of the total deposit portfolio. Competition The banking and financial services industry is extremely competitive in our market area.
Removed
In 2022, 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.
Added
The compensation components of First Commonwealth’s total rewards are designed to provide competitive pay that aligns with individual and company performance as well as stakeholder interests. Employee benefits plans support employees with insurance, retirement and work/life plans.
Removed
In May 2022, the Federal Reserve Board, the FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a joint proposal that would, among other things (i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions.
Added
We believe that the type of employees who can help us be successful in that mission have the five core values of: accountability, customer focus, integrity, excellence and inclusion. We have additional leadership points that help define how the leaders of our company will lead us forward.
Removed
Because First Commonwealth exceeded the $10 billion asset threshold with the acquisition of Centric, the Bank will become subject to the CFPB's supervision and enforcement with respect to federal consumer protection laws. State authorities are responsible for monitoring our compliance with all state consumer laws. Deposit Insurance.
Added
We are proud that we were selected as a Forbes World’s Best Bank in 2023 for the fifth consecutive year. We received other national recognitions for our community engagement work and our financial literacy work. We were proudly ranked a top SBA lender in all of our market places.
Removed
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.
Added
In 2023 we extended our Community Commitment Hours program, which allows for eight hours of paid time off to use toward eligible volunteer opportunities. During this inaugural year, 923 hours were used by 115 employees.
Removed
However, with the acquisition of Centric in January 2023, we will be over $10 billion and subject to the Volcker Rule.
Added
We also present and celebrate several employees quarterly through our "Why We Exist" recognitions which recognize the stories of employees who go above and beyond in living our mission with measurable growth results for our customers and our bank.
Removed
First Commonwealth's total assets are expected to exceed $10 billion as of December 31, 2023, and as such, we expect to become subject to the interchange fee cap beginning July 1, 2024. 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.
Added
In October 2023, the Federal Reserve Board, the FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a joint rule to modernize regulations implementing the CRA. Under the final rules, the agencies will evaluate bank performance across the varied activities they conduct and communities in which they operate.
Added
This includes evaluating lending outside traditional assessment areas generated by the growth of non–branch delivery systems, such as online and mobile banking, branchless banking, and hybrid models. The final rule adopts a new metrics–based approach to evaluating bank retail lending and community development financing, using benchmarks based on peer and demographic data.
Added
The final rule also clarifies eligible CRA activities, such as affordable housing, that are focused on low- and moderate-income, underserved, native, and rural communities. The rule requires large banks (including FCB) to comply with new and expanded data gathering and reporting requirements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA 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. 18 Table of Contents 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.
Biggest changeA 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.
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.
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. Cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing.
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.
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 24 Table of Contents 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.
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.
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 cyberattacks, 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.
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 22 Table of Contents disasters; trade policies and tariffs; or a combination of these or other factors.
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.
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, 2022, commercial real estate mortgage loans comprised approximately 31% of our loan portfolio.
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, 2023, commercial real estate mortgage loans comprised approximately 34% of our loan portfolio.
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.
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 22 Table of Contents scale or expanded services.
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.
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. 17 Table of Contents 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.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 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.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents 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 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 23 Table of Contents Accounting Pronouncements at the end of Item 7.
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.
Regulatory approvals could be delayed, impeded, 21 Table of Contents 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.
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.
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, 2022, we had $312.5 million of goodwill and other intangible assets.
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, 2023, we had $386.5 million of goodwill and other intangible assets.
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.
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.
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.
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, 23 Table of Contents or otherwise adversely affect the price of our common stock.
The level of the allowance for credit losses reflects management’s continuing evaluation of 17 Table of Contents industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions and unidentified losses in the current loan portfolio.
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.
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.
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.
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.
We have had to recently increase wages in certain positions to attract talent, particularly in entry-level type positions and certain specialty areas. 19 Table of Contents 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.
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.
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.
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.
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.
Failure to successfully manage these risks in the development and 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.
Failure to successfully manage these risks in the development and 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. 20 Table of Contents 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.
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.
Such a change in these practices could materially adversely affect our ability to anticipate business needs and meet regulatory requirements. Furthermore, 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.
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.
This may lead to open positions remaining unfilled for longer periods of time or a need to increase wages to attract workers.
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. 20 Table of Contents 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.
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.
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 adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences.
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.
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.
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.
As of December 31, 2023, approximately 27% of our deposits were either uninsured or otherwise unsecured and we rely on these deposits for liquidity.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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned “Net Interest Income” and Item 7A.
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.
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. 19 Table of Contents 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.
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.
Removed
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. 16 Table of Contents 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”).
Added
We Are Subject to Risk Arising from Conditions in the Commercial Real Estate Market As of December 31, 2023, commercial real estate mortgage loans comprised approximately 34% of our loan portfolio.
Removed
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.
Added
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.
Removed
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.
Added
Because 18 Table of Contents 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.
Removed
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.
Added
In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties, such as those within our commercial real estate portfolio.
Removed
Dollar LIBOR settings would cease and immediately after June 30, 2023 (the “Transition Date”), any remaining U.S. dollar LIBOR settings would either cease to be published or no longer be representative.
Added
Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market.
Removed
Accordingly, we ceased entering into new contracts that use LIBOR as a reference rate prior to December 31, 2021 and have been diligently working to transition our remaining LIBOR exposure to alternative index rates.
Added
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.
Removed
Depending on the particular circumstances and customer preference, we have offered several alternative index rates to replace LIBOR in our affected contracts with customers desiring to enter into proactive modifications prior to the Transition Date, including the Secured Overnight Financing Rate (“SOFR”), the Bloomberg Short Term Bank Yield Index (“BSBY”), and the Prime Rate (as published in the Wall Street Journal), each with appropriate spread adjustments.
Added
Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Removed
After diligently analyzing the options available to us under applicable legal documents and monitoring market acceptance, and in accordance with guidance from the Alternative Reference Rates Committee of the New York Fed (“ARRC”), the federal bank regulatory agencies, and the Federal Adjustable Interest Rate (LIBOR) Act of 2021 (the “LIBOR Act”) and its implementing regulations, we have developed a transition plan to replace the LIBOR index in all affected contracts that remain outstanding as of June 30, 2023 to the appropriate version of the SOFR Rate, with appropriate Board-recommended spread adjustments as described in the LIBOR Act, which we have determined to be appropriate for our funding model and customer needs.
Added
Furthermore, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed "too big to fail" or remove deposits from the banking system entirely.
Removed
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.
Added
A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. Unrealized Losses in Our Securities Portfolio Could Affect Liquidity As market interest rates have increased, we have experienced unrealized losses on our available for sale securities portfolio.
Removed
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.
Added
Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios.
Removed
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. Credit and Lending Risks We Are Subject to Lending Risk There are inherent risks associated with our lending activities.
Added
We actively monitor our available for sale securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity.
Removed
The allowance, in the judgment of management, is appropriate to reserve for estimated loan losses and risks inherent in the loan portfolio.
Added
Nonetheless, our access to liquidity sources could be affected by unrealized losses if securities must be sold at a loss; tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; the Federal Home Loan Bank of Pittsburgh ("FHLB") or other funding sources reduce capacity; or bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits.
Removed
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.
Added
Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFirst Commonwealth Bank has 119 community banking offices, of which 44 are leased and 75 are owned. We also lease two mortgage loan production offices, four corporate loan production offices and an office for our equipment finance business.
Biggest changeFirst Commonwealth Bank has 126 community banking offices, of which 48 are leased and 78 are owned. We also lease two mortgage loan production offices, four corporate loan production offices and an office for our equipment finance business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

8 edited+0 added−0 removed8 unchanged
Biggest changeMine Safety Disclosures Not applicable. 24 Table of Contents 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, 2022 is set forth below: Jane Grebenc, age 64, 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.
Biggest changeMine Safety Disclosures Not applicable. 26 Table of Contents 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, 2023 is set forth below: Jane Grebenc, age 65, 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.
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 46, has served as Executive Vice President, Chief Risk Officer and General Counsel of First Commonwealth Financial Corporation since November 2010.
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 47, has served as Executive Vice President, Chief Risk Officer and General Counsel of First Commonwealth Financial Corporation since November 2010.
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 53, has served as Executive Vice President / Human Resources since March 1, 2013. Ms. Riggle has been with First Commonwealth since 1991. Over the course of her tenure, Ms.
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 54, has served as Executive Vice President / Human Resources since March 1, 2013. Ms. Riggle has been with First Commonwealth since 1991. Over the course of her tenure, Ms.
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 Table of Contents PART II
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. 27 Table of Contents PART II
Reske, age 59, 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, age 60, 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.
Brian Karrip, age 62, 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.
Brian Karrip, age 63, 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.
Michael Price, age 60, 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.
Michael Price, age 61, 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.
Lombardi, age 63, 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 55, has served as the Executive Vice President of Business Integration of First Commonwealth Bank since May 2011.
Lombardi, age 64, 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 56, has served as the Executive Vice President of Business Integration of First Commonwealth Bank since May 2011.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+4 added−0 removed1 unchanged
Biggest changePeriod High Sale Low Sale Cash Dividends Per Share 2022 First Quarter $ 17.55 $ 15.12 $ 0.115 Second Quarter 15.23 13.01 0.120 Third Quarter 15.39 12.84 0.120 Fourth Quarter 14.92 12.99 0.120 Period High Sale Low Sale Cash Dividends Per Share 2021 First Quarter $ 15.51 $ 10.88 $ 0.110 Second Quarter 15.54 13.77 0.115 Third Quarter 14.08 12.45 0.115 Fourth Quarter 16.16 13.99 0.115 Federal and state regulations contain restrictions on the ability of First Commonwealth to pay dividends.
Biggest changePeriod High Sale Low Sale Cash Dividends Per Share 2023 First Quarter $ 16.43 $ 12.36 $ 0.120 Second Quarter 14.48 11.46 0.125 Third Quarter 14.54 11.94 0.125 Fourth Quarter 15.81 11.55 0.125 Period High Sale Low Sale Cash Dividends Per Share 2022 First Quarter $ 17.55 $ 15.12 $ 0.115 Second Quarter 15.23 13.01 0.120 Third Quarter 15.39 12.84 0.120 Fourth Quarter 14.92 12.99 0.120 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 24, 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 Table of Contents 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.
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 24, 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. 28 Table of Contents 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 stock performance graph assumes $100 was invested on December 31, 2017, and the cumulative return is measured as of each subsequent fiscal year end.
BMI Banks Index and the Russell 2000 Index. The stock performance graph assumes $100 was invested on December 31, 2018, and the cumulative return is measured as of each subsequent fiscal year end.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities First Commonwealth is listed on the NYSE under the symbol “FCF.” As of December 31, 2022, there were approximately 5,263 holders of record of First Commonwealth’s common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities First Commonwealth is listed on the NYSE under the symbol “FCF.” As of December 31, 2023, there were approximately 5,255 holders of record of First Commonwealth’s common stock.
BMI Banks Index 100.00 83.54 114.74 100.10 136.10 112.89 Unregistered Sales of Equity Securities and Use of Proceeds 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.
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.
Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 First Commonwealth Financial Corporation 100.00 86.36 106.79 84.49 128.36 115.13 Russell 2000 Index 100.00 88.99 111.70 134.00 153.85 122.41 S&P U.S.
Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 First Commonwealth Financial Corporation 100.00 123.66 97.83 148.63 133.31 152.91 Russell 2000 Index 100.00 125.52 150.58 172.90 137.56 160.85 S&P U.S.
Added
BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41 Unregistered Sales of Equity Securities and Use of Proceeds The following table details the amount of shares repurchased during the fourth quarter of 2023.
Added
Month Ending: Total Number of Shares Purchased Average Price Paid per Share (or Unit) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 31, 2023 73,184 $ 11.75 73,184 1,427,837 November 30, 2023 — — — 1,300,752 December 31, 2023 — — — 1,126,364 Total 73,184 $ 11.75 73,184 (1) Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $12.18 as of October 31, 2023, $13.37 as of November 30, 2023 and $15.44 as of December 31, 2023.
Added
Insider Trading Policies and Procedures Our board of directors has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, or by First Commonwealth itself.
Added
These policies have been reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable NYSE listing standards. 29 Table of Contents ITEM 6. [Reserved] 30 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+63 added−50 removed46 unchanged
Biggest changeManagement 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, 2022. 35 Table of Contents A detailed analysis of our credit loss experience for the previous five years is shown below: 2022 2021 2020 2019 2018 (dollars in thousands) Loans and leases outstanding at end of year $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 $ 5,774,139 Average loans outstanding $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 $ 5,582,651 Balance, beginning of year $ 92,522 $ 101,309 $ 51,637 $ 47,764 $ 48,298 Adoption of accounting standard - ASU 2016-13 — — 13,393 — — Loans charged off: Commercial, financial, agricultural and other 2,361 7,020 6,318 3,393 5,294 Real estate construction — 9 — — — Residential real estate 339 309 1,040 1,042 1,313 Commercial real estate 2,487 1,659 4,939 2,008 3,930 Loans to individuals 4,658 4,061 6,953 5,831 4,576 Total loans charged off 9,845 13,058 19,250 12,274 15,113 Recoveries of loans previously charged off: Commercial, financial, agricultural and other 394 2,430 314 326 788 Real estate construction 9 155 26 158 141 Residential real estate 187 468 414 315 361 Commercial real estate 769 135 312 189 153 Loans to individuals 1,349 1,460 991 626 605 Total recoveries 2,708 4,648 2,057 1,614 2,048 Net charge-offs 7,137 8,410 17,193 10,660 13,065 Provision charged to expense 17,521 (377) 53,472 14,533 12,531 Balance, end of year $ 102,906 $ 92,522 $ 101,309 $ 51,637 $ 47,764 Ratios: Net charge-offs as a percentage of average loans and leases outstanding 0.10 % 0.12 % 0.26 % 0.18 % 0.23 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding 1.35 % 1.35 % 1.50 % 0.83 % 0.83 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans 1.35 % 1.37 % 1.61 % 0.83 % 0.83 % 36 Table of Contents Noninterest Income The components of noninterest income for each year in the three-year period ended December 31 are as follows: 2022 compared to 2021 2022 2021 2020 $ Change % Change (dollars in thousands) Noninterest Income: Trust income $ 10,518 $ 11,111 $ 9,101 $ (593) (5) % Service charges on deposit accounts 19,641 17,984 16,387 1,657 9 Insurance and retail brokerage commissions 8,857 8,502 7,850 355 4 Income from bank owned life insurance 5,459 6,433 6,552 (974) (15) Card related interchange income 27,603 27,954 23,966 (351) (1) Swap fee income 4,685 2,543 1,588 2,142 84 Other income 10,263 8,185 7,892 2,078 25 Subtotal 87,026 82,712 73,336 4,314 5 Net securities gains 2 16 70 (14) (88) Gain on sale of mortgage loans 5,276 13,555 18,764 (8,279) (61) Gain on sale of other loans and assets 6,036 8,130 4,827 (2,094) (26) Derivative mark to market 368 2,344 (2,521) (1,976) (84) Total noninterest income $ 98,708 $ 106,757 $ 94,476 $ (8,049) (8) % 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 $4.3 million, or 5%, in 2022.
Biggest changeManagement 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, 2023. 38 Table of Contents A detailed analysis of our credit loss experience for the previous five years is shown below: 2023 2022 2021 2020 2019 (dollars in thousands) Loans and leases outstanding at end of year $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 Average loans outstanding $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 Balance, beginning of year $ 102,906 $ 92,522 $ 101,309 $ 51,637 $ 47,764 Day 1 allowance for credit loss on PCD acquired loans 27,205 — — — — Provision for credit losses - acquisition day 1 non-PCD 10,653 — — — — Adoption of accounting standard - ASU 2016-13 — — — 13,393 — Loans charged off: Commercial, financial, agricultural and other 19,199 2,361 7,020 6,318 3,393 Real estate construction — — 9 — — Residential real estate 561 339 309 1,040 1,042 Commercial real estate 6,277 2,487 1,659 4,939 2,008 Loans to individuals 7,230 4,658 4,061 6,953 5,831 Total loans charged off 33,267 9,845 13,058 19,250 12,274 Recoveries of loans previously charged off: Commercial, financial, agricultural and other 498 394 2,430 314 326 Real estate construction — 9 155 26 158 Residential real estate 247 187 468 414 315 Commercial real estate 151 769 135 312 189 Loans to individuals 2,219 1,349 1,460 991 626 Total recoveries 3,115 2,708 4,648 2,057 1,614 Net charge-offs 30,152 7,137 8,410 17,193 10,660 Provision charged to expense 7,106 17,521 (377) 53,472 14,533 Balance, end of year $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Ratios: Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.10 % 0.12 % 0.26 % 0.18 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % 39 Table of Contents Noninterest Income The components of noninterest income for each year in the three-year period ended December 31 are as follows: 2023 compared to 2022 2023 2022 2021 $ Change % Change (dollars in thousands) Noninterest Income: Trust income $ 10,516 $ 10,518 $ 11,111 $ (2) — % Service charges on deposit accounts 21,437 19,641 17,984 1,796 9 Insurance and retail brokerage commissions 9,628 8,857 8,502 771 9 Income from bank owned life insurance 4,875 5,459 6,433 (584) (11) Card-related interchange income 28,640 27,603 27,954 1,037 4 Swap fee income 1,519 4,685 2,543 (3,166) (68) Other income 9,388 10,263 8,185 (875) (9) Subtotal 86,003 87,026 82,712 (1,023) (1) Net securities (losses) gains (103) 2 16 (105) (5,250) Gain on sale of mortgage loans 3,951 5,276 13,555 (1,325) (25) Gain on sale of other loans and assets 6,744 6,036 8,130 708 12 Derivative mark to market 14 368 2,344 (354) (96) Total noninterest income $ 96,609 $ 98,708 $ 106,757 $ (2,099) (2) % Noninterest income, excluding net securities (losses) gains, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market, decreased $1.0 million, or 1%, in 2023.
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.
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 to other financial information presented in this Annual Report.
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 change in the allowance for credit losses 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.
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.
Commercial banking services include commercial lending and leasing, 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.
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. 28 Table of Contents • 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.
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. 31 Table of Contents • 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.
(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 six years.
(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 40 years and have anticipated average lives to maturity ranging from less than three years to approximately six years.
Contractual Obligations and Off-Balance Sheet Arrangements The table below sets forth our contractual obligations to make future payments as of December 31, 2022. For a more detailed description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table below.
Contractual Obligations and Off-Balance Sheet Arrangements The table below sets forth our contractual obligations to make future payments as of December 31, 2023. For a more detailed description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table below.
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 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. • 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.
The impact of growth in interest-earning assets in 2022 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, 2022.
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.
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, 2022.
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.
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, 2022, and 2021.
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, 2023, and 2022.
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.” 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.
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.” 45 Table of Contents 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.
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 Table of Contents Following is a detailed schedule of the amortized cost of securities held to maturity as of December 31: 2022 2021 2020 (dollars in thousands) Obligations of U.S.
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. 46 Table of Contents Following is a detailed schedule of the amortized cost of securities held to maturity as of December 31: 2023 2022 2021 (dollars in thousands) Obligations of U.S.
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 2022 was $1.0 million compared to $1.1 million in 2021.
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.
Options risk arises from “embedded options” 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. 46 Table of Contents The process by which we manage our interest rate risk is called asset/liability management.
Options risk arises from “embedded options” 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.
Results of the 100 and 200 basis point interest rate decline 48 Table of Contents 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.
Results of the 100 and 200 basis point interest rate decline scenario are affected by the fact that many of our interest-bearing liabilities are at rates below 1%, with an assumed floor of zero in the model.
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.
Market Risk Market risk refers to potential losses arising from items such as 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.
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 0.76 and 0.84 at December 31, 2022 and 2021, respectively.
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 0.69 and 0.76 at December 31, 2023 and 2022, respectively.
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.
The impact of the sensitivity to changes in interest rates is provided in the table below. 51 Table of Contents 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.
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.
We currently view the determination of the allowance for credit losses and business combinations to be critical because they are 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.
As of December 31, 2022, a reserve for expected credit losses of $10.0 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.
As of December 31, 2023, a reserve for expected credit losses of $7.3 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.
The allowance for credit losses includes specific allocations of $0.7 million related to nonperforming loans covering 2% of the total nonperforming balance at December 31, 2022 and specific allocations of $0.4 million covering 1% of the total nonperforming balance at December 31, 2021.
The allowance for credit losses includes specific allocations of $4.5 million related to nonperforming loans covering 11% of the total nonperforming balance at December 31, 2023 and specific allocations of $0.7 million covering 2% of the total nonperforming balance at December 31, 2022.
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, 2022 for a discussion and analysis of the factors that affected periods prior to 2022.
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 February 28, 2023 for a discussion and analysis of the factors that affected periods prior to 2023.
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.
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 and income taxes.
Net interest income comprises a majority of our operating revenue (net interest income before provision expense plus noninterest income) at 76% and 72% for the years ended December 31, 2022 and 2021, respectively.
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.
The allowance for credit losses as a percentage of nonperforming loans was 290.0% and 167.7% at December 31, 2022 and 2021, respectively. The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time.
The allowance for credit losses as a percentage of nonperforming loans was 298.2% and 290.0% at December 31, 2023 and 2022, respectively. The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time.
Allowance for Credit Losses Following is a summary of the allocation of the allowance for credit losses at December 31: 2022 2021 2020 2019 2018 Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) (dollars in thousands) Commercial, financial, agricultural and other $ 22,650 16 % $ 18,093 17 % $ 17,187 23 % $ 20,234 20 % $ 19,374 20 % Real estate construction 8,822 7 4,220 7 7,966 6 2,558 7 2,002 6 Residential real estate 21,412 29 12,625 28 14,358 26 4,093 27 3,969 27 Commercial real estate 28,804 31 33,376 33 41,953 33 19,768 34 18,386 37 Loans to individuals 21,218 17 24,208 15 19,845 12 4,984 12 4,033 10 Total $ 102,906 $ 92,522 $ 101,309 $ 51,637 $ 47,764 Allowance for credit losses as percentage of end-of-period loans outstanding 1.35 % 1.35 % 1.50 % 0.83 % 0.83 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans 1.35 % 1.37 % 1.61 % 0.83 % 0.83 % (a) Represents the ratio of loans in each category to total loans.
Allowance for Credit Losses Following is a summary of the allocation of the allowance for credit losses at December 31: 2023 2022 2021 2020 2019 Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) (dollars in thousands) Commercial, financial, agricultural and other $ 27,996 17 % $ 22,650 16 % $ 18,093 17 % $ 17,187 23 % $ 20,234 20 % Real estate construction 7,418 7 8,822 7 4,220 7 7,966 6 2,558 7 Residential real estate 23,901 27 21,412 29 12,625 28 14,358 26 4,093 27 Commercial real estate 37,071 34 28,804 31 33,376 33 41,953 33 19,768 34 Loans to individuals 21,332 15 21,218 17 24,208 15 19,845 12 4,984 12 Total $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Allowance for credit losses as percentage of end-of-period loans and leases outstanding 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % (a) Represents the ratio of loans in each category to total loans.
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.
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.
For the years 2022 and 2021, the cost of our interest-bearing liabilities averaged 0.31% and 0.27%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 3.79% and 3.43%, respectively. The ALCO is responsible for the identification and management of interest rate risk exposure.
For the years 2023 and 2022, the cost of our interest-bearing liabilities averaged 2.03% and 0.31%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.23% and 3.79%, respectively. The ALCO is responsible for the identification and management of interest rate risk exposure.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $14.8 million in the year ended December 31, 2022 compared to the same period in 2021.
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.
Comparing December 31, 2022 to December 31, 2021, the general reserve for performing loans is 1.34% and 1.36%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increased from 0.7% of nonperforming loans at December 31, 2021 to 2.0% of nonperforming loans at December 31, 2022.
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 increased $10.4 million from December 31, 2021 to December 31, 2022. The allowance for credit losses as a percentage of end-of-period loans outstanding was 1.35% at both December 31, 2022 and 2021. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans.
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.
The taxable equivalent yield on interest-earning assets was 3.79% for the year ended December 31, 2022, an increase of 36 basis points from the 3.43% yield for the same period in 2021.
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.
However, we do not anticipate liquidating the investments prior to maturity. 42 Table of Contents Following is a detailed schedule of the amortized cost of securities available for sale as of December 31: 2022 2021 2020 (dollars in thousands) Obligations of U.S. Government Agencies: Mortgage-Backed Securities—Residential $ 4,127 $ 5,242 $ 6,492 Mortgage-Backed Securities—Commercial 324,306 365,024 182,823 Obligations of U.S.
However, we do not anticipate liquidating the investments prior to maturity. Following is a detailed schedule of the amortized cost of securities available for sale as of December 31: 2023 2022 2021 (dollars in thousands) Obligations of U.S. Government Agencies: Mortgage-Backed Securities—Residential $ 3,565 $ 4,127 $ 5,242 Mortgage-Backed Securities—Commercial 512,979 324,306 365,024 Obligations of U.S.
Long-term debt decreased $1.0 million, from $182.3 million at December 31, 2021 to $181.2 million at December 31, 2022. 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.
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.
The change in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $14.8 million in the year ended December 31, 2022 compared to the same period in 2021, and changes in rates positively impacted net interest income by $18.9 million. Interest-sensitive assets totaling $4.3 billion will either reprice or mature over the next twelve months.
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.
Losses are recognized when a loss is expected and the amount is reasonably estimable. 40 Table of Contents The following is a comparison of nonperforming assets and the effects on interest due to nonaccrual loans for the period ended December 31: 2022 2021 2020 2019 2018 (dollars in thousands) Nonperforming Loans: Loans on nonaccrual basis $ 20,193 $ 34,926 $ 30,801 $ 18,638 $ 11,509 Loans held for sale on nonaccrual basis — — 13 — — Troubled debt restructured loans on nonaccrual basis 8,852 13,134 14,740 6,037 11,761 Troubled debt restructured loans on accrual basis 6,442 7,120 8,512 7,542 8,757 Total nonperforming loans $ 35,487 $ 55,180 $ 54,066 $ 32,217 $ 32,027 Loans and leases past due in excess of 90 days and still accruing $ 1,991 $ 1,606 $ 1,523 $ 2,073 $ 1,582 Other real estate owned $ 534 $ 642 $ 1,215 $ 2,228 $ 3,935 Loans and leases outstanding at end of period $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 $ 5,774,139 Average loans and leases outstanding $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 $ 5,582,651 Nonperforming loans as a percentage of total loans and leases 0.46 % 0.81 % 0.80 % 0.52 % 0.55 % Provision for credit losses on loans and leases $ 17,521 $ (377) $ 53,472 $ 14,533 $ 12,531 Allowance for credit losses $ 102,906 $ 92,522 $ 101,309 $ 51,637 $ 47,764 Net charge-offs $ 7,137 $ 8,410 $ 17,193 $ 10,660 $ 13,065 Net charge-offs as a percentage of average loans and leases outstanding 0.10 % 0.12 % 0.26 % 0.18 % 0.23 % Provision for credit losses on loans and leases as a percentage of net charge-offs 245.50 % (4.48) % 311.01 % 136.33 % 95.91 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (a) 1.35 % 1.35 % 1.50 % 0.83 % 0.83 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding, excluding PPP loans (a) 1.35 % 1.37 % 1.61 % 0.83 % 0.83 % Allowance for credit losses as a percentage of nonperforming loans (a) 289.98 % 167.67 % 187.43 % 160.28 % 149.14 % Gross income that would have been recorded at original rates $ 1,444 $ 3,503 $ 3,733 $ 1,860 $ 1,428 Interest that was reflected in income 244 569 297 262 256 Net reduction to interest income due to nonaccrual $ 1,200 $ 2,934 $ 3,436 $ 1,598 $ 1,172 (a) End of period loans and nonperforming loans exclude loans held for sale.
The following is a comparison of nonperforming assets and the effects on interest due to nonaccrual loans for the period ended December 31: 2023 2022 2021 2020 2019 (dollars in thousands) Nonperforming Loans: Loans on nonaccrual basis $ 39,472 $ 20,193 $ 34,926 $ 30,801 $ 18,638 Loans held for sale on nonaccrual basis — — — 13 — Troubled debt restructured loans on nonaccrual basis — 8,852 13,134 14,740 6,037 Troubled debt restructured loans on accrual basis — 6,442 7,120 8,512 7,542 Total nonperforming loans $ 39,472 $ 35,487 $ 55,180 $ 54,066 $ 32,217 Loans and leases past due in excess of 90 days and still accruing $ 9,436 $ 1,991 $ 1,606 $ 1,523 $ 2,073 Other real estate owned $ 422 $ 534 $ 642 $ 1,215 $ 2,228 Loans and leases outstanding at end of period $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 Average loans and leases outstanding $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 Nonperforming loans as a percentage of total loans and leases 0.44 % 0.46 % 0.81 % 0.80 % 0.52 % Provision for credit losses on loans and leases $ 7,106 $ 17,521 $ (377) $ 53,472 $ 14,533 Provision for credit losses - acquisition day 1 non-PCD $ 10,653 $ — $ — $ — $ — Allowance for credit losses $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Net charge-offs $ 30,152 $ 7,137 $ 8,410 $ 17,193 $ 10,660 Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.10 % 0.12 % 0.26 % 0.18 % Provision for credit losses on loans and leases as a percentage of net charge-offs (b) 23.57 % 245.50 % (4.48) % 311.01 % 136.33 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (a) 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % Allowance for credit losses as a percentage of nonperforming loans (a) 298.23 % 289.98 % 167.67 % 187.43 % 160.28 % Gross income that would have been recorded at original rates $ 3,894 $ 1,444 $ 3,503 $ 3,733 $ 1,860 Interest that was reflected in income 530 244 569 297 262 Net reduction to interest income due to nonaccrual $ 3,364 $ 1,200 $ 2,934 $ 3,436 $ 1,598 (a) End of period loans and nonperforming loans exclude loans held for sale.
The allowance for credit losses as a percentage of nonperforming loans was 290.0% at December 31, 2022 and 167.7% as of December 31, 2021.
The allowance for credit losses as a percentage of nonperforming loans was 298.2% at December 31, 2023 and 290.0% as of December 31, 2022.
Results of Operations—2022 Compared to 2021 Net Income Net income for 2022 was $128.2 million, or $1.37 per diluted share, as compared to net income of $138.3 million, or $1.44 per diluted share in 2021.
Results of Operations—2023 Compared to 2022 Net Income Net income for 2023 was $157.1 million, or $1.54 per diluted share, as compared to net income of $128.2 million, or $1.37 per diluted share in 2022.
Nonperforming loans as a percentage of total loans decreased to 0.46% at December 31, 2022 from 0.81% at December 31, 2021. The allowance to nonperforming loan ratio was 290.0% as of December 31, 2022 and 167.7% at December 31, 2021.
Nonperforming loans as a percentage of total loans decreased to 0.44% at December 31, 2023 from 0.46% at December 31, 2022. The allowance to nonperforming loan ratio was 298.2% as of December 31, 2023 and 290.0% at December 31, 2022.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2022 ($) $ (11,973) $ (5,486) $ 5,902 $ 11,413 December 31, 2022 (%) (3.12) % (1.43) % 1.54 % 2.98 % December 31, 2021 ($) $ (9,008) $ (4,976) $ 5,956 $ 10,224 December 31, 2021 (%) (3.25) % (1.79) % 2.15 % 3.69 % 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.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2023 ($) $ (9,867) $ (4,504) $ 6,215 $ 11,091 December 31, 2023 (%) (2.53) % (1.16) % 1.59 % 2.84 % December 31, 2022 ($) $ (11,973) $ (5,486) $ 5,902 $ 11,413 December 31, 2022 (%) (3.12) % (1.43) % 1.54 % 2.98 % The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates as compared to if rates remained unchanged, assuming there are no changes in balance sheet categories.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 329,267 387,848 277,351 Mortgage-Backed Securities—Commercial 4,794 7,309 9,737 Other Government-Sponsored Enterprises 22,221 21,904 — Obligations of States and Political Subdivisions 26,643 29,402 34,391 Debt Securities Issued by Foreign Governments 1,000 1,000 800 Total Securities Held to Maturity $ 461,162 $ 541,311 $ 361,844 The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2022.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 296,432 329,267 387,848 Mortgage-Backed Securities—Commercial 2,190 4,794 7,309 Other Government-Sponsored Enterprises 22,543 22,221 21,904 Obligations of States and Political Subdivisions 25,561 26,643 29,402 Debt Securities Issued by Foreign Governments 1,000 1,000 1,000 Total Securities Held to Maturity $ 419,009 $ 461,162 $ 541,311 The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2023.
The sensitivity of estimated prepayment speeds had the largest impact on the residential first lien loan pool. 29 Table of Contents Selected Financial Information The following table provides selected financial information for the periods ended December 31, 2022 2021 2020 2019 2018 (dollars in thousands, except share data) Interest income $ 329,953 $ 293,838 $ 301,209 $ 325,264 $ 292,257 Interest expense 17,732 15,297 32,938 55,402 40,035 Net interest income 312,221 278,541 268,271 269,862 252,222 Provision for credit losses 21,106 (1,376) 56,718 14,533 12,531 Net interest income after provision for credit losses 291,115 279,917 211,553 255,329 239,691 Net securities gains (losses) 2 16 70 22 8,102 Other income 98,706 106,741 94,406 85,463 80,535 Other expenses 229,638 213,857 215,826 209,965 195,556 Income before income taxes 160,185 172,817 90,203 130,849 132,772 Income tax provision 32,004 34,560 16,756 25,516 25,274 Net Income $ 128,181 $ 138,257 $ 73,447 $ 105,333 $ 107,498 Per Share Data—Basic Net Income $ 1.37 $ 1.45 $ 0.75 $ 1.07 $ 1.09 Dividends declared $ 0.475 $ 0.455 $ 0.440 $ 0.400 $ 0.350 Average shares outstanding 93,612,043 95,583,890 97,499,586 98,317,787 99,036,163 Per Share Data—Diluted Net Income $ 1.37 $ 1.44 $ 0.75 $ 1.07 $ 1.08 Average shares outstanding 93,887,447 95,840,285 97,758,965 98,588,164 99,223,513 At End of Period Total assets $ 9,805,666 $ 9,545,093 $ 9,068,104 $ 8,308,773 $ 7,828,255 Investment securities 1,250,237 1,595,529 1,205,294 1,256,176 1,335,228 Loans and leases, net of unearned income 7,642,143 6,839,230 6,761,183 6,189,148 5,774,139 Allowance for credit losses 102,906 92,522 101,309 51,637 47,764 Deposits 8,005,469 7,982,498 7,438,666 6,677,615 5,897,992 Short-term borrowings 372,694 138,315 117,373 201,853 721,823 Subordinated debentures 170,937 170,775 170,612 170,450 170,288 Other long-term debt 4,862 5,573 56,258 56,917 7,551 Shareholders’ equity 1,052,074 1,109,372 1,068,617 1,055,665 975,389 Key Ratios Return on average assets 1.34 % 1.47 % 0.82 % 1.31 % 1.42 % Return on average equity 11.99 12.55 6.82 10.32 11.41 Net loans to deposits ratio 94.18 84.52 89.53 91.91 97.09 Dividends per share as a percent of net income per share 34.67 31.38 58.67 37.38 32.11 Average equity to average assets ratio 11.16 11.72 12.00 12.71 12.47 Results for 2020 through 2022 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.
Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, internal risk grade, estimated value of the underlying collateral and interest rate environment. 32 Table of Contents Selected Financial Information The following table provides selected financial information for the periods ended December 31, 2023 2022 2021 2020 2019 (dollars in thousands, except share data) Interest income $ 529,998 $ 329,953 $ 293,838 $ 301,209 $ 325,264 Interest expense 144,322 17,732 15,297 32,938 55,402 Net interest income 385,676 312,221 278,541 268,271 269,862 Provision for credit losses 14,813 21,106 (1,376) 56,718 14,533 Net interest income after provision for credit losses 370,863 291,115 279,917 211,553 255,329 Net securities gains (losses) (103) 2 16 70 22 Other income 96,712 98,706 106,741 94,406 85,463 Other expenses 269,917 229,638 213,857 215,826 209,965 Income before income taxes 197,555 160,185 172,817 90,203 130,849 Income tax provision 40,492 32,004 34,560 16,756 25,516 Net Income $ 157,063 $ 128,181 $ 138,257 $ 73,447 $ 105,333 Per Share Data—Basic Net Income $ 1.55 $ 1.37 $ 1.45 $ 0.75 $ 1.07 Dividends declared $ 0.495 $ 0.475 $ 0.455 $ 0.440 $ 0.400 Average shares outstanding 101,556,427 93,612,043 95,583,890 97,499,586 98,317,787 Per Share Data—Diluted Net Income $ 1.54 $ 1.37 $ 1.44 $ 0.75 $ 1.07 Average shares outstanding 101,822,201 93,887,447 95,840,285 97,758,965 98,588,164 At End of Period Total assets $ 11,459,488 $ 9,805,666 $ 9,545,093 $ 9,068,104 $ 8,308,773 Investment securities 1,490,866 1,250,237 1,595,529 1,205,294 1,256,176 Loans and leases, net of unearned income 8,968,761 7,642,143 6,839,230 6,761,183 6,189,148 Allowance for credit losses 117,718 102,906 92,522 101,309 51,637 Deposits 9,192,309 8,005,469 7,982,498 7,438,666 6,677,615 Short-term borrowings 597,835 372,694 138,315 117,373 201,853 Subordinated debentures 177,741 170,937 170,775 170,612 170,450 Other long-term debt 4,122 4,862 5,573 56,258 56,917 Shareholders’ equity 1,314,274 1,052,074 1,109,372 1,068,617 1,055,665 Key Ratios Return on average assets 1.42 % 1.34 % 1.47 % 0.82 % 1.31 % Return on average equity 12.80 11.99 12.55 6.82 10.32 Net loans to deposits ratio 96.29 94.18 84.52 89.53 91.91 Dividends per share as a percent of net income per share 31.94 34.67 31.38 58.67 37.38 Average equity to average assets ratio 11.06 11.16 11.72 12.00 12.71 Results for 2020 through 2023 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.
Government Agencies: Mortgage-Backed Securities—Residential $ 2,008 $ 2,409 $ 2,766 Mortgage-Backed Securities—Commercial 75,229 91,439 36,799 Obligations of U.S.
Government Agencies: Mortgage-Backed Securities—Residential $ 1,781 $ 2,008 $ 2,409 Mortgage-Backed Securities—Commercial 69,502 75,229 91,439 Obligations of U.S.
Net interest income, on a fully taxable equivalent basis, was $313.3 million for the year-ended December 31, 2022, a $33.6 million, or 12%, increase compared to $279.6 million for the same period in 2021. The net interest margin, on a fully taxable equivalent basis, increased 32 basis points to 3.58% in 2022 from 3.26% in 2021.
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.
Positively affecting net interest income was a $85.5 million increase in average net free funds at December 31, 2022 as compared to December 31, 2021. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets.
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.
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 $10.0 million at December 31, 2022 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.
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 December 31, 2023 and is classified in “Other liabilities” on the Consolidated Statements of Financial Condition.
At December 31, 2022, FCB operated 119 community banking offices throughout Pennsylvania and Ohio, as well as loan production offices in Pittsburgh, Pennsylvania, and Cleveland, Columbus, Canton, Lewis Center and Hudson, Ohio.
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.
The mark to market adjustment on interest rate swaps entered into for our commercial loan customers decreased $2.0 million. This adjustment does not reflect a realized gain or loss on the swaps, but rather relates to a change in fair value due to movements in corporate bond spreads and swap rates as well as changes in counterparty credit risk.
This adjustment does not reflect a realized gain or loss on the swaps, but rather relates to a change in fair value due to movements in corporate bond spreads and swap rates as well as changes in counterparty credit risk.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2022 ($) $ (45,361) $ (20,166) $ 18,626 $ 36,011 December 31, 2022 (%) (11.83) % (5.26) % 4.86 % 9.39 % December 31, 2021 ($) $ (26,120) $ (17,640) $ 13,867 $ 29,192 December 31, 2021 (%) (9.42) % (6.36) % 5.00 % 10.53 % The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2023 ($) $ (38,890) $ (17,930) $ 18,545 $ 34,788 December 31, 2023 (%) (9.97) % (4.60) % 4.76 % 8.92 % December 31, 2022 ($) $ (45,361) $ (20,166) $ 18,626 $ 36,011 December 31, 2022 (%) (11.83) % (5.26) % 4.86 % 9.39 % The analysis and model used to quantify the sensitivity of our net interest income becomes less meaningful in a decreasing 200 basis point scenario given the current interest rate environment.
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.
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.
Interest-bearing demand and savings deposits decreased $8.7 million, noninterest-bearing demand deposits increased $11.7 million and time deposits increased $20.0 million. For additional information concerning our deposits, please refer to Note 13 “Interest-Bearing Deposits.” At December 31, 2022 and 2021, time deposits of $100 thousand or more totaled $172.0 million and $136.1 million, respectively.
For additional information concerning our deposits, please refer to Note 13 “Interest-Bearing Deposits.” At December 31, 2023 and 2022, time deposits of $100 thousand or more totaled $725.1 million and $172.0 million, respectively.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 527,777 632,687 481,109 Other Government-Sponsored Enterprises 1,000 1,000 100,996 Obligations of States and Political Subdivisions 9,482 9,538 11,154 Corporate Securities 32,010 32,088 22,941 Total Securities Available for Sale $ 898,702 $ 1,045,579 $ 805,515 As of December 31, 2022, securities available for sale had a fair value of $0.8 billion.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 559,769 527,777 632,687 Other Government-Sponsored Enterprises 1,000 1,000 1,000 Obligations of States and Political Subdivisions 9,226 9,482 9,538 Corporate Securities 51,886 32,010 32,088 Total Securities Available for Sale $ 1,138,425 $ 898,702 $ 1,045,579 As of December 31, 2023, securities available for sale had a fair value of $1.0 billion.
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 Table of Contents monitoring and measuring liquidity and quantifies minimum liquidity requirements based on limits approved by our Board of Directors.
In order to manage this risk, our Board of Directors has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for 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.
Net charge-offs in the loans to individuals category totaled $3.3 million for 2022, primarily due to charge-offs of indirect auto loans. 41 Table of Contents 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 and leases as a percentage of net charge-offs increased to a 245.5% for the year ended December 31, 2022 from a negative 4.5% for the year ended December 31, 2021.
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 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.
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.
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. The increase in specific reserves is primarily the result of individually analyzed PCD loans acquired from Centric.
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, 2022 2021 2020 (dollars in thousands) Interest income per Consolidated Statements of Income $ 329,953 $ 293,838 $ 301,209 Adjustment to fully taxable equivalent basis 1,049 1,100 1,462 Interest income adjusted to fully taxable equivalent basis (non-GAAP) 331,002 294,938 302,671 Interest expense 17,732 15,297 32,938 Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 313,270 $ 279,641 $ 269,733 32 Table of Contents 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 2022 2021 2020 Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate (dollars in thousands) Assets Interest-earning assets: Interest-bearing deposits with banks $ 188,370 $ 1,722 0.91 % $ 317,493 $ 400 0.13 % $ 179,180 $ 218 0.12 % Tax-free investment securities 23,060 606 2.63 28,139 753 2.68 44,308 1,333 3.01 Taxable investment securities 1,355,836 25,545 1.88 1,463,785 25,244 1.72 1,167,316 24,749 2.12 Loans and leases, net of unearned income (b)(c)(e) 7,172,624 303,129 4.23 6,777,192 268,541 3.96 6,737,339 276,371 4.10 Total interest-earning assets 8,739,890 331,002 3.79 8,586,609 294,938 3.43 8,128,143 302,671 3.72 Noninterest-earning assets: Cash 111,554 94,949 97,632 Allowance for credit losses (94,912) (101,399) (76,705) Other assets 818,701 813,905 825,510 Total noninterest-earning assets 835,343 807,455 846,437 Total Assets $ 9,575,233 $ 9,394,064 $ 8,974,580 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits (d) $ 1,596,197 $ 1,376 0.09 % $ 1,529,697 $ 434 0.03 % $ 1,525,195 $ 1,843 0.12 % Savings deposits (d) 3,374,638 4,145 0.12 3,282,307 3,111 0.09 3,027,016 9,966 0.33 Time deposits 352,622 1,193 0.34 449,452 2,204 0.49 726,702 10,163 1.40 Short-term borrowings 144,834 1,999 1.38 119,801 99 0.08 142,634 704 0.49 Long-term debt 181,724 9,019 4.96 200,961 9,449 4.70 233,701 10,262 4.39 Total interest-bearing liabilities 5,650,015 17,732 0.31 5,582,218 15,297 0.27 5,655,248 32,938 0.58 Noninterest-bearing liabilities and shareholders’ equity: Noninterest-bearing demand deposits (d) 2,708,580 2,580,460 2,101,412 Other liabilities 147,871 130,007 140,612 Shareholders’ equity 1,068,767 1,101,379 1,077,308 Total noninterest-bearing funding sources 3,925,218 3,811,846 3,319,332 Total Liabilities and Shareholders’ Equity $ 9,575,233 $ 9,394,064 $ 8,974,580 Net Interest Income and Net Yield on Interest-Earning Assets $ 313,270 3.58 % $ 279,641 3.26 % $ 269,733 3.32 % (a) Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.
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, 2023 2022 2021 (dollars in thousands) Interest income per Consolidated Statements of Income $ 529,998 $ 329,953 $ 293,838 Adjustment to fully taxable equivalent basis 1,237 1,049 1,100 Interest income adjusted to fully taxable equivalent basis (non-GAAP) 531,235 331,002 294,938 Interest expense 144,322 17,732 15,297 Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 386,913 $ 313,270 $ 279,641 35 Table of Contents 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 2023 2022 2021 Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate (dollars in thousands) Assets Interest-earning assets: Interest-bearing deposits with banks $ 176,146 $ 9,491 5.39 % $ 188,370 $ 1,722 0.91 % $ 317,493 $ 400 0.13 % Tax-free investment securities 21,485 578 2.69 23,060 606 2.63 28,139 753 2.68 Taxable investment securities 1,239,369 29,340 2.37 1,355,836 25,545 1.88 1,463,785 25,244 1.72 Loans and leases, net of unearned income (b)(c)(e) 8,714,770 491,826 5.64 7,172,624 303,129 4.23 6,777,192 268,541 3.96 Total interest-earning assets 10,151,770 531,235 5.23 8,739,890 331,002 3.79 8,586,609 294,938 3.43 Noninterest-earning assets: Cash 112,157 111,554 94,949 Allowance for credit losses (132,046) (94,912) (101,399) Other assets 959,972 818,701 813,905 Total noninterest-earning assets 940,083 835,343 807,455 Total Assets $ 11,091,853 $ 9,575,233 $ 9,394,064 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits (d) $ 1,959,595 $ 25,652 1.31 % $ 1,596,197 $ 1,376 0.09 % $ 1,529,697 $ 434 0.03 % Savings deposits (d) 3,548,587 54,847 1.55 3,374,638 4,145 0.12 3,282,307 3,111 0.09 Time deposits 972,735 31,907 3.28 352,622 1,193 0.34 449,452 2,204 0.49 Short-term borrowings 439,556 21,747 4.95 144,834 1,999 1.38 119,801 99 0.08 Long-term debt 186,687 10,169 5.45 181,724 9,019 4.96 200,961 9,449 4.70 Total interest-bearing liabilities 7,107,160 144,322 2.03 5,650,015 17,732 0.31 5,582,218 15,297 0.27 Noninterest-bearing liabilities and shareholders’ equity: Noninterest-bearing demand deposits (d) 2,552,596 2,708,580 2,580,460 Other liabilities 205,224 147,871 130,007 Shareholders’ equity 1,226,873 1,068,767 1,101,379 Total noninterest-bearing funding sources 3,984,693 3,925,218 3,811,846 Total Liabilities and Shareholders’ Equity $ 11,091,853 $ 9,575,233 $ 9,394,064 Net Interest Income and Net Yield on Interest-Earning Assets $ 386,913 3.81 % $ 313,270 3.58 % $ 279,641 3.26 % (a) Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.
Higher levels of interest-earning assets resulted in an increase of $13.5 million in interest income, and changes in the volume and mix of interest-bearing liabilities decreased interest expense by $1.3 million, primarily due to decreases in long-term borrowings and time deposits.
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.
Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC. Short-Term Borrowings and Long-Term Debt Short-term borrowings increased $234.4 million, or 169%, from $138.3 million at December 31, 2021 to $372.7 million at December 31, 2022.
Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC. Short-Term Borrowings and Long-Term Debt 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.
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: 2022 2021 Amount % Amount % (dollars in thousands) 3 months or less $ 12,663 19 % $ 13,349 25 % Over 3 months through 6 months 11,886 18 14,116 26 Over 6 months through 12 months 14,675 23 16,092 30 Over 12 months 26,231 40 10,390 19 Total $ 65,455 100 % $ 53,947 100 % The estimated total amount of uninsured deposits was $2.1 billion at both December 31, 2022 and 2021.
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: 2023 2022 Amount % Amount % (dollars in thousands) 3 months or less $ 70,122 24 % $ 12,663 19 % Over 3 months through 6 months 62,981 22 11,886 18 Over 6 months through 12 months 107,144 37 14,675 23 Over 12 months 48,508 17 26,231 40 Total $ 288,755 100 % $ 65,455 100 % The estimated total amount of uninsured deposits was $2.5 billion and $2.1 billion at December 31, 2023 and 2022, respectively.
(e) Includes held for sale loans. 33 Table of Contents 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 2022 Change from 2021 2021 Change from 2020 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 $ 1,322 $ (168) $ 1,490 $ 182 $ 166 $ 16 Tax-free investment securities (147) (136) (11) (580) (487) (93) Taxable investment securities 301 (1,857) 2,158 495 6,285 (5,790) Loans and leases 34,588 15,659 18,929 (7,830) 1,634 (9,464) Total interest income (b) 36,064 13,498 22,566 (7,733) 7,598 (15,331) Interest-bearing liabilities: Interest-bearing demand deposits 942 20 922 (1,409) 5 (1,414) Savings deposits 1,034 83 951 (6,855) 842 (7,697) Time deposits (1,011) (474) (537) (7,959) (3,882) (4,077) Short-term borrowings 1,900 20 1,880 (605) (112) (493) Long-term debt (430) (904) 474 (813) (1,437) 624 Total interest expense 2,435 (1,255) 3,690 (17,641) (4,584) (13,057) Net interest income $ 33,629 $ 14,753 $ 18,876 $ 9,908 $ 12,182 $ (2,274) (a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.
(e) Includes held for sale loans. 36 Table of Contents 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 2023 Change from 2022 2022 Change from 2021 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 $ 7,769 $ (111) $ 7,880 $ 1,322 $ (168) $ 1,490 Tax-free investment securities (28) (41) 13 (147) (136) (11) Taxable investment securities 3,795 (2,190) 5,985 301 (1,857) 2,158 Loans and leases 188,697 65,233 123,464 34,588 15,659 18,929 Total interest income (b) 200,233 62,891 137,342 36,064 13,498 22,566 Interest-bearing liabilities: Interest-bearing demand deposits 24,276 327 23,949 942 20 922 Savings deposits 50,702 209 50,493 1,034 83 951 Time deposits 30,714 2,108 28,606 (1,011) (474) (537) Short-term borrowings 19,748 4,067 15,681 1,900 20 1,880 Long-term debt 1,150 246 904 (430) (904) 474 Total interest expense 126,590 6,957 119,633 2,435 (1,255) 3,690 Net interest income $ 73,643 $ 55,934 $ 17,709 $ 33,629 $ 14,753 $ 18,876 (a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.
Income Tax The provision for income taxes of $32.0 million in 2022 reflects a decrease of $2.6 million compared to the provision for income taxes in 2021, as a result of a $12.6 million decrease in the level of income before taxes. The effective tax rate was 20.0% for tax expense in both 2022 and 2021.
Income Tax 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. The effective tax rate was 20.5% and 20.0% for tax expense in 2023 and 2022, respectively.
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.
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.
The available for sale investment portfolio amortized cost decreased $146.9 million, or 14%, at December 31, 2022 compared to 2021. Available for sale investment calls or maturities totaled $145.6 million during 2022.
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.
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.
A loan is also placed in nonaccrual status 52 Table of Contents when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower.
Net charge-offs related to loans to individuals were $3.3 million for the year ended December 31, 2022, including $1.9 million for indirect auto loans and $1.0 million related to other consumer loans.
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.
Loan and Lease Portfolio Following is a summary of our loan and lease portfolio as of December 31: 2022 2021 2020 2019 2018 Amount % Amount % Amount % Amount % Amount % (dollars in thousands) Commercial, financial, agricultural and other $ 1,211,706 16 % $ 1,173,452 17 % $ 1,555,986 23 % $ 1,241,853 20 % $ 1,138,473 20 % Real estate construction 513,101 7 494,456 7 427,221 6 449,039 7 358,978 6 Residential real estate 2,194,669 29 1,920,250 28 1,750,592 26 1,681,362 27 1,562,405 27 Commercial real estate 2,425,012 31 2,251,097 33 2,211,569 33 2,117,519 34 2,123,544 37 Loans to individuals 1,297,655 17 999,975 15 815,815 12 699,375 12 590,739 10 Total loans and leases $ 7,642,143 100 % $ 6,839,230 100 % $ 6,761,183 100 % $ 6,189,148 100 % $ 5,774,139 100 % The loan and lease portfolio totaled $7.6 billion as of December 31, 2022, reflecting growth of $802.9 million, or 12%, compared to December 31, 2021.
Loan and Lease Portfolio Following is a summary of our loan and lease portfolio as of December 31: 2023 2022 2021 2020 2019 Amount % Amount % Amount % Amount % Amount % (dollars in thousands) Commercial, financial, agricultural and other $ 1,543,349 17 % $ 1,211,706 16 % $ 1,173,452 17 % $ 1,555,986 23 % $ 1,241,853 20 % Real estate construction 597,735 7 513,101 7 494,456 7 427,221 6 449,039 7 Residential real estate 2,416,876 27 2,194,669 29 1,920,250 28 1,750,592 26 1,681,362 27 Commercial real estate 3,053,152 34 2,425,012 31 2,251,097 33 2,211,569 33 2,117,519 34 Loans to individuals 1,357,649 15 1,297,655 17 999,975 15 815,815 12 699,375 12 Total loans and leases $ 8,968,761 100 % $ 7,642,143 100 % $ 6,839,230 100 % $ 6,761,183 100 % $ 6,189,148 100 % 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: Originated Acquired (1) Total (dollars in thousands) Commercial, financial, agricultural and other $ 1,296,982 $ 246,367 $ 1,543,349 Real estate construction 516,620 $ 81,115 597,735 Residential real estate 2,328,360 $ 88,516 2,416,876 Commercial real estate 2,519,053 $ 534,099 3,053,152 Loans to individuals 1,356,986 $ 663 1,357,649 Total loans and leases $ 8,018,001 $ 950,760 $ 8,968,761 (1) Includes January 31, 2023 balance of loans acquired as part of the Centric acquisition plus day 1 gross up of PCD loans.
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.
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.
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.
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.
Credit measures as of December 31, 2022 compared to December 31, 2021 reflect a decrease in the level of criticized loans of $65.3 million, from $198.1 million at December 31, 2021 to $132.9 million at December 31, 2022. Commercial real estate loans accounted for $60.0 million of this decrease.
Credit measures as of December 31, 2023 compared to December 31, 2022 reflect an increase in the level of criticized loans of $77.3 million, from $132.9 million at December 31, 2022 to $210.2 million at December 31, 2023. Commercial, financial, agricultural and other loans and commercial real estate loans accounted for $41.9 million, and $18.8 million, respectively, of this increase.
Comparing the year ended December 31, 2022 with the same period in 2021, changes in rates positively impacted net interest income by $18.9 million. The higher yield on interest-earning assets increased net interest income by $22.6 million, while the change in the cost of interest-bearing liabilities negatively impacted net interest income by $3.7 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.
Total noninterest income decreased $8.0 million, or 8%, in comparison to the year ended December 31, 2021. The most significant change, other than the changes noted above, includes a decrease of $8.3 million in gain on sale of mortgage loans due to a decline in volume and spread received on mortgage loans sold.
The most significant change, other than the changes noted above, includes a decrease of $1.3 million in gain on sale of mortgage loans due to a decline in volume and spread received on mortgage loans sold. The mark to market adjustment on interest rate swaps entered into for our commercial loan customers decreased $0.4 million.
Footnote Number Reference 1 Year or Less After 1 But Within 3 Years After 3 But Within 5 Years After 5 Years Total (dollars in thousands) FHLB advances 16 $ 740 $ 1,568 $ 1,693 $ 861 $ 4,862 Subordinated debentures 15 — — — 170,937 170,937 Operating leases 11 4,952 9,400 8,157 35,244 57,753 Total contractual obligations $ 5,692 $ 10,968 $ 9,850 $ 207,042 $ 233,552 The table above excludes our cash obligations upon maturity of certificates of deposit, which is set forth in Note 13 “Interest-Bearing Deposits” of the Consolidated Financial Statements.
Footnote Number Reference 1 Year or Less After 1 But Within 3 Years After 3 But Within 5 Years After 5 Years Total (dollars in thousands) FHLB advances 16 $ 769 $ 1,629 $ 1,483 $ 241 $ 4,122 Subordinated debentures 15 — — 49,592 128,149 177,741 Operating leases 11 5,845 10,771 9,579 36,749 62,944 Total contractual obligations $ 6,614 $ 12,400 $ 60,654 $ 165,139 $ 244,807 48 Table of Contents The table above excludes our cash obligations upon maturity of certificates of deposit, which is set forth in Note 13 “Interest-Bearing Deposits” of the Consolidated Financial Statements.
Losses or specifically assigned allowance for credit losses are recognized where appropriate. The allowance for credit losses was $102.9 million at December 31, 2022 or 1.35% of loans outstanding, compared to $92.5 million, or 1.35% of loans outstanding, at December 31, 2021.
This payment represents 21.0% of the nonperforming loans at December 31, 2023. The allowance for credit losses was $117.7 million at December 31, 2023 or 1.31% of loans outstanding, compared to $102.9 million, or 1.35% of loans outstanding, at December 31, 2022.
These percentages incorporate the impact of our cash flow hedges that convert the interest rate on $500.0 million of our 1-month LIBOR based loans to fixed 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.
Average short-term borrowings increased by $25.0 million for the year ended December 31, 2022 compared to the same period in 2021. Average long-term debt decreased $19.2 million, while the cost of long-term debt increased by 26 basis points due to the maturity of lower costing borrowings and increasing rates on the variable rate portion of the subordinated debentures.
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. 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 decline in shareholders' equity was the result of net income of $128.2 million, offset by a $128.9 million decrease in accumulated other comprehensive income, $44.6 million in dividends declared and $15.6 million in stock repurchases.
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.
First Commonwealth's total assets are expected to exceed $10 billion as of December 31, 2023, and as such, we expect to become subject to the interchange fee cap beginning July 1, 2024. 37 Table of Contents Noninterest Expense The components of noninterest expense for each year in the three-year period ended December 31 are as follows: 2022 compared to 2021 2022 2021 2020 $ Change % Change (dollars in thousands) Noninterest Expense: Salaries and employee benefits $ 126,031 $ 119,506 $ 118,961 $ 6,525 5 % Net occupancy 18,037 16,586 17,647 1,451 9 Furniture and equipment 15,582 15,642 15,393 (60) 0 Data processing 13,922 12,373 10,543 1,549 13 Advertising and promotion 5,031 4,983 4,679 48 1 Pennsylvania shares tax 4,447 4,604 4,500 (157) (3) Intangible amortization 3,196 3,497 3,689 (301) (9) Other professional fees and services 4,894 4,501 3,886 393 9 FDIC insurance 2,871 2,529 2,699 342 14 Other operating expenses 30,701 26,663 24,770 4,038 15 Subtotal 224,712 210,884 206,767 13,828 7 Loss on sale or write-down of assets 343 303 680 40 13 Litigation and operational losses 2,834 2,324 1,411 510 22 Merger and acquisition related 1,702 — — 1,702 — COVID-19 expense 151 449 874 (298) (66) Early retirement — — 3,422 — 100 Branch consolidation (104) (103) 2,672 (1) 1 Total noninterest expense $ 229,638 $ 213,857 $ 215,826 $ 15,781 7 % Total noninterest expense increased $15.8 million, or 7%, compared to the year ended December 31, 2021.
We estimate the application of the interchange fee cap to decrease our interchange income by approximately $7.5 million in 2024 and to decrease our annual interchange income by approximately $14.9 million in 2025. 40 Table of Contents Noninterest Expense The components of noninterest expense for each year in the three-year period ended December 31 are as follows: 2023 compared to 2022 2023 2022 2021 $ Change % Change (dollars in thousands) Noninterest Expense: Salaries and employee benefits $ 142,871 $ 126,031 $ 119,506 $ 16,840 13 % Net occupancy 19,221 18,037 16,586 1,184 7 Furniture and equipment 17,308 15,582 15,642 1,726 11 Data processing 15,010 13,922 12,373 1,088 8 Advertising and promotion 5,713 5,031 4,983 682 14 Pennsylvania shares tax 4,364 4,447 4,604 (83) (2) Intangible amortization 4,983 3,196 3,497 1,787 56 Other professional fees and services 5,919 4,894 4,501 1,025 21 FDIC insurance 6,260 2,871 2,529 3,389 118 Other operating expenses 34,389 30,748 27,009 3,641 12 Subtotal 256,038 224,759 211,230 31,279 14 Loss on sale or write-down of assets 204 343 303 (139) (41) Litigation and operational losses 4,641 2,834 2,324 1,807 64 Merger and acquisition related 9,034 1,702 — 7,332 431 Total noninterest expense $ 269,917 $ 229,638 $ 213,857 $ 40,279 18 % Total noninterest expense increased $40.3 million, or 18%, compared to the year ended December 31, 2022.
The cost of interest-bearing liabilities was 0.31% for the year-ended December 31, 2022, compared to 0.27% for the same period in 2021. Higher market interest rates resulted in the cost of interest-bearing deposits increasing 2 basis points and short-term borrowings increasing 130 basis points in comparison to the same period in the prior year.
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.
Held to maturity investment purchases of $0.2 million were offset by the calls or maturities of $79.6 million in investments. See Note 8 “Investment Securities" and Note 17 “Fair Values of Assets and Liabilities” for additional information related to the investment portfolio. 44 Table of Contents Deposits Total deposits increased $23.0 million in 2022.
See Note 8 “Investment Securities" and Note 17 “Fair Values of Assets and Liabilities” for additional information related to the investment portfolio. 47 Table of Contents Deposits Total deposits increased $1.2 billion in 2023, of which $0.8 billion was assumed as part of the Centric acquisition.

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