FCF First Commonwealth Financial Corp /Pa/ - 10-K

ITEM 1A.     Risk Factors

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

Risks Related To Our Business

Interest Rate Risks

We Are Subject to Interest Rate Risk

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

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.

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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.

Our Allowance for Credit Losses may be Insufficient

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

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

As of December 31, 2025, commercial real estate mortgage loans comprised approximately 33% of our loan portfolio. Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. The COVID-19 pandemic was a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties, including those within our commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.

Liquidity Risk

We Are Subject to Liquidity Risk

We require liquidity to meet our deposit and debt obligations as they come due. Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that could reduce our access to liquidity sources include a downturn in the economy, difficult credit markets or adverse regulatory actions against us. Our access to deposits may also be affected by the liquidity needs of our depositors. In particular, a substantial majority of our liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of our assets are loans, which cannot be called or sold in the same time frame. Our access to deposits may be negatively impacted by, among other factors, higher interest rates, which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. 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. 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. As of December 31, 2025, approximately 29% 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. 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 a result of changes in market interest rates, we have experienced unrealized losses on our available for sale securities portfolio. 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. We actively monitor our available for sale securities portfolio and we do not

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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. Nonetheless, our access to liquidity sources could be affected by unrealized losses if: (i) securities must be sold at a loss; (ii) tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; (iii) the Federal Home Loan Bank of Pittsburgh ("FHLB") or other funding sources reduce capacity; or (iv) 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. 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.

Operational Risks

Labor Shortages and Constraints in the Supply Chain Could Adversely Affect Our Customers’ Operations as well as Our Operations

Many sectors in the United States and around the world are experiencing a shortage of workers. The shortage of workers is exacerbating supply chain disruptions around the world, causing certain industries to struggle to regain momentum due to a lack of workers or materials. Our commercial customers may be impacted by the shortage of workers and constraints in the supply chain, which could adversely impact our customers’ operations. Customers may experience disruptions in their operations, which could lead to reduced cash flow and difficulty in making loan repayments. The financial services industry has also been affected by the shortage of workers, and First Commonwealth has experienced the intense competition for talent that is currently underway in the financial services industry. This may lead to open positions remaining unfilled for longer periods of time or a need to increase wages to attract workers. We have recently had to increase wages in certain positions to retain and attract talent, particularly in entry-level positions and certain specialty areas.

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

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

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

As of December 31, 2025, we had $400.2 million of goodwill and other intangible assets. A significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or a significant and sustained decline in the price of the Company’s common stock may necessitate taking charges in the future related to the impairment of our goodwill and other intangible assets, which could have a material adverse effect on our business, financial condition and results of operations.

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

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

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

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

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

Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect on our business, financial condition and results of operations.

Our Reputation and Our Business Are Subject to Negative Publicity Risk

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

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

Individual, economic, political, industry-specific conditions and other factors outside of our control, such as fuel prices, energy costs, real estate values or other factors that affect customer income levels, could alter anticipated customer behavior, including borrowing, repayment, investment and deposit practices. Such a change in these practices could materially adversely affect our ability to anticipate business needs and meet regulatory requirements. 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.

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

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

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

Our business is dependent upon the availability of technology, the Internet and telecommunication systems to enable financial transactions by clients, record and monitor transactions and transmit and receive data to and from clients and third parties. Information security risks have increased significantly due to the use of online, telephone and mobile banking channels by clients and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of,

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cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, the theft of client assets through fraudulent transactions or the disruption of our or our clients’ or other third parties’ business operations.

Even well-protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving, including as a result of artificial intelligence, and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or those related to our customers, merchants or our third party vendors, including as a result of 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. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Increasing Fraud Risk Could Adversely Affect Our Business, Financial Condition, and Reputation

We are exposed to an increasing risk of fraud, including cyber fraud, identity theft, account takeover, and other fraudulent activities targeting financial institutions and their customers. The sophistication and frequency of these schemes continue to grow, driven by advances in technology and the proliferation of digital banking channels. Fraudulent activity can result in financial losses for us or our customers, increased operational costs, and potential legal exposure. Although we employ robust security measures, including authentication protocols, transaction monitoring, and fraud detection systems, these controls may not be sufficient to prevent all fraudulent activity. Criminals continuously adapt their methods to circumvent existing safeguards, and emerging technologies such as artificial intelligence may further enhance their ability to perpetrate fraud. Significant fraud-related losses could negatively impact our earnings, capital, and liquidity. In addition, fraud incidents may harm our reputation, erode customer trust, and lead to regulatory scrutiny or enforcement actions. Failure to effectively manage and mitigate fraud risk 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. In particular, we contract with an external vendor for our core processing system, which is used to maintain customer and account records, reflect account transactions and activity, and support our customer relationship management systems for substantially all of our deposit and loan customers. Accordingly, our operations are exposed to the risk that these vendors will not perform in accordance with the contractual arrangements under service level agreements. The failure of an external vendor to perform in accordance with the contractual arrangements under service level agreements, whether due to changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to First Commonwealth’s operations and financial reporting, which could have a material adverse effect on First Commonwealth’s business and, in turn, First Commonwealth’s financial condition and results of operations.

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

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

External and Market-Related Risks

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

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of

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these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices that are insufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our business, financial condition and results of operations.

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

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

The Proliferation of Stablecoins May Adversely Impact Our Business

The growing adoption of stablecoins, including yield‑bearing stablecoins, and the evolving regulatory framework under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”), could adversely affect our deposits, liquidity, and competitive position. Certain stablecoin products may function as substitutes for traditional bank deposits while operating under different regulatory requirements. If regulatory safeguards under the GENIUS Act prove insufficient or are unevenly applied between banks and non‑bank issuers, stablecoins could facilitate deposit outflows, reduce funding stability, and create risks associated with parallel banking systems. Regulatory changes or additional compliance obligations arising from the GENIUS Act could also increase our operational costs or limit our ability to compete effectively in digital payments and settlement activities.

Compliance and Regulatory Risks

We are Subject to Extensive Government Regulation and Supervision

Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not security holders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by Federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, the revocation of a banking charter, other sanctions by regulatory agencies, civil money penalties and/or reputational damage. In this regard, government authorities, including the bank regulatory agencies, are pursuing aggressive enforcement actions with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. See “Supervision and Regulation” included in Item 1. Business for a more detailed description of the regulatory requirements applicable to First Commonwealth.

We Are Subject To the Potential Adverse Effects of a U.S. Federal Government Shutdown

A prolonged or repeated shutdown of the U.S. federal government could adversely affect our business, financial condition, liquidity, and results of operations. Funding gaps or lapses in federal appropriations may disrupt the operations of government agencies that provide critical economic data, administer regulatory functions, or directly support our customers and counterparties. During a shutdown, federal agencies such as the Internal Revenue Service, Small Business Administration, and various supervisory bodies may suspend or significantly curtail their activities, which can delay loan originations, hinder verification processes, impede regulatory approvals, and reduce the availability of government guaranteed lending programs. A shutdown may also impair the financial capacity of borrowers who depend on federal salaries, contracts, reimbursements, or benefit programs, including government employees, federal contractors, and recipients of government-funded services. Reduced or delayed income to these borrowers could increase delinquencies, reduce loan demand, negatively affect deposit inflows, and increase our credit risk exposure. In addition, disruptions to federal economic data releases or fiscal operations may create volatility in financial markets, affecting interest rates, liquidity conditions, and the valuation of securities in our investment portfolio. The duration and economic impact of any government shutdown are inherently uncertain, and any such event could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations.

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Risks Related to Acquisition Activity

Potential Acquisitions May Disrupt Our Business and Dilute Stockholder Value

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

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

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

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

Risks Associated with Our Common Stock

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

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

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

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

As more fully discussed in Part II, Item 8, Financial Statements and Supplementary Data-Note 25, Regulatory Restrictions and Capital Adequacy, which is located elsewhere in this report, the ability of First Commonwealth to declare or pay dividends on its common stock may also be subject to certain restrictions in the event that First Commonwealth elects to defer the payment of interest on its junior subordinated debt securities.

An Investment in Our Common Stock Is Not an Insured Deposit

Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.

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

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

General Risk Factors

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

Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as governmental monetary policies. Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer, is highly dependent upon the business environment in the markets where we operate and in the United States as a whole. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by a decline in economic growth both in the U.S. and internationally; declines in business activity or investor or business confidence; limitations on the availability of or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; oil price volatility; natural disasters; trade policies and tariffs; or a combination of these or other factors. In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflicts, terrorism or other geopolitical events. Current economic conditions are being heavily impacted by recent inflationary conditions and higher interest rates, the effects of which may impact our profitability by negatively impacting our fixed costs and expenses. Economic and inflationary pressure on consumers and uncertainty regarding economic improvement could result in changes in consumer and business spending, borrowing and saving habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.

Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long-term sovereign credit rating on the U.S. from AAA to AA+. Most recently, in connection with successive failures by the U.S. government to reverse the trend of large annual fiscal deficits and growing interest costs, Moody's lowered its long-term issuer credit rating on the U.S. from Aaa to Aa1. A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.

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

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

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

We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, particularly if our asset quality or earnings were to deteriorate significantly. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are

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outside of our control, and our financial condition. Economic conditions and the loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve.

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

Our Stock Price Can Be Volatile

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

Our stock price could also decrease regardless of operating results as a result of: (i) general market fluctuations, including real or anticipated changes in the strength of the economy; (ii) industry factors and general economic and political conditions and events, such as economic slowdowns or recessions; and (iii) interest rate changes, oil price volatility or credit loss trends.

Changes in Accounting Standards Could Materially Impact Our Financial Statements

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

We May Not Be Able to Attract and Retain Skilled People

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

ITEM 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, 2025, and 2024. 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. 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 2, 2026 for a discussion and analysis of the factors that affected periods prior to 2025.

Company Overview

First Commonwealth provides a diversified array of consumer and commercial banking services through our bank subsidiary, FCB. We also provide trust and wealth management services through FCB and insurance products through FCIA. At December 31, 2025, FCB operated 126 community banking offices throughout Pennsylvania and Ohio, as well as Business Centers in Canfield, Canton, Hudson, Independence and Lewis Center, Ohio and Pittsburgh and Berwyn, Pennsylvania.

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

As a financial institution with a focus on traditional banking activities, we earn the majority of our revenue through net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing our net interest margin, which is net interest income (on a fully taxable-equivalent basis) as a percentage of our average interest-earning assets. We also generate revenue through fees earned on various services and products that we offer to our customers and 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.

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

Critical Accounting Policies and Significant Accounting Estimates

First Commonwealth’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and predominant practice in the banking industry. The preparation of financial statements in accordance with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Over time, these estimates, assumptions and judgments may prove to be inaccurate or vary from actual results and may significantly affect our reported results and financial position for the period presented or in future periods. We currently view the determination of the allowance for credit losses 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. The allowance represents management’s best estimate of expected losses in our existing loan and lease portfolio as of the balance sheet date. The provision is a periodic charge to earnings in an amount necessary to maintain the allowance at a level that is appropriate based on management’s assessment of expected losses. Management determines and reviews with the Board of Directors the appropriateness of the allowance on a quarterly basis in accordance with the methodology described below.

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

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• The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally recognized firm.

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

• We assess whether the loans identified for review are “nonperforming”. This means it is expected that all amounts will not be collected according to the contractual terms of the loan agreement, which generally represents loans that management has placed on nonaccrual status.

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

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

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

As noted above, the allowance for credit losses is estimated using a number of inputs and assumptions. Management's sensitivity analysis of the allowance identified that the model has the highest degree of sensitivity around values used in the economic forecast, specifically national unemployment, gross domestic product and business bankruptcies. Additionally, there is also a high degree of sensitivity related to estimated prepayment speeds, as it is a major driver for the life of loan expectations. The sensitivity of estimated prepayment speeds had the largest impact on the residential first lien loan pool.

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Selected Financial Information

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

(dollars in thousands, except share data)

Interest income

Interest expense

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Net securities gains (losses)

Other income

Other expenses

Income before income taxes

Income tax provision

Net Income

Per Share Data—Basic

Net Income

Dividends declared

Average shares outstanding

Per Share Data—Diluted

Net Income

Average shares outstanding

At End of Period

Total assets

Investment securities

Loans and leases, net of unearned income

Allowance for credit losses

Deposits

Short-term borrowings

Subordinated debentures

Other long-term debt

Shareholders’ equity

Key Ratios

Return on average assets

Return on average equity

Net loans to deposits ratio

Dividends per share as a percent of net income per share

Average equity to average assets ratio

Results of Operations—2025 Compared to 2024

Net Income

Net income for 2025 was $152.3 million, or $1.47 per diluted share, as compared to net income of $142.6 million, or $1.39 per diluted share in 2024. Contributing to the increase in net income was a $47.2 million increase in net interest income, offset by a $7.6 million increase in provision for credit losses. Provision for credit losses in 2025 included $3.8 million related to the day 1 adjustment on non-PCD loans acquired in the Center acquisition. Additionally, the increase in net interest income was offset by

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a $24.1 million increase in noninterest expense in 2025 compared to 2024, with $4.0 million of the 2025 increase attributable to the Center acquisition. Noninterest income decreased $2.4 million in 2025 compared to 2024 resulting from a decline of $6.3 million in card-related interchange income as a result of the Company being subject to the Durbin Amendment to the Dodd-Frank Act for the full year of 2025 compared to six-months in 2024.

Our return on average equity was 10.1% and our return on average assets was 1.26% for 2025, compared to 10.4% and 1.22%, respectively, for 2024.

Average diluted shares for the year 2025 were 1.3% more than the comparable period in 2024 primarily due to $45.9 million in common shares issued in relation to the Center acquisition offset by $36.5 million of common stock buybacks completed during 2025.

Net Interest Income

Net interest income, which is our primary source of revenue, is the difference between interest income from earning assets (loans and securities) and interest expense paid on liabilities (deposits, short-term borrowings and long-term debt). The net interest margin is expressed as the percentage of net interest income, on a fully taxable equivalent basis, to average interest-earning assets. To compare the tax exempt asset yields to taxable yields, amounts are adjusted to the pretax equivalent amounts based on the marginal corporate federal income tax rate of 21%. The taxable equivalent adjustment to net interest income for 2025 was $1.4 million compared to $1.3 million in 2024. Net interest income comprises a majority of our revenue (net interest income before provision expense plus noninterest income) at 81% and 79% for the years ended December 31, 2025 and 2024, respectively.

Net interest income, on a fully taxable equivalent basis, was $427.5 million for the year-ended December 31, 2025, a $47.2 million, or 12%, increase compared to $380.2 million for the same period in 2024. The net interest margin, on a fully taxable equivalent basis, increased 29 basis points to 3.84% in 2025 from 3.55% in 2024. Net interest income and the net interest margin are affected by both changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

Growth in interest-earning assets as well as higher reinvestment rates for the investment and loan portfolios had a positive impact on interest income for the year ended December 31, 2025. Average earning assets for the year ended December 31, 2025 increased $0.4 billion, or 4%, compared to the year ended December 31, 2024 and interest income increased $32.3 million, or 5.4%. The primary interest earning asset attributable to the Center acquisition was their loan portfolio, which averaged $195.9 million for the year ended December 31, 2025. Interest-sensitive assets totaling $5.7 billion will either reprice or mature over the next twelve months.

The taxable equivalent yield on interest-earning assets was 5.70% for the year ended December 31, 2025, an increase of 8 basis points from the 5.62% yield for the same period in 2024. The yield on interest-earning assets benefited from higher reinvestment rates related to the investment and loan portfolios. The tax-equivalent yield for the investment portfolio increased by 32 basis points and the loan and lease portfolio increased by 4 basis points when compared to the year ended December 31, 2025. The increase in the loan and lease portfolio yield is primarily the result of higher reinvestment rates on our fixed loans, including our fixed rate commercial loan portfolio, indirect automobile loan portfolio and direct consumer installment loan portfolio, which increased by 37 basis points, 35 basis points and 29 basis points, respectively. Additionally, for the year ended December 31, 2025, seven basis points of the yield on interest-earning assets can be attributed to the recognition of $7.4 million in accretion of purchase accounting marks, primarily from the Centric and Center acquisitions. For the year ended December 31, 2024, $7.5 million in accretion of purchase accounting marks benefited the yield on interest-earning assets by seven basis points.

As of December 31, 2025, 49% of our loan portfolio had variable or adjustable interest rates and 51% had fixed interest rates. After incorporating the impact of our cash flow hedges that convert the interest rate on $175.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 47% of our loan portfolio. Loans with variable or adjustable interest rates include approximately 26% tied to the prime interest rate, 51% tied to SOFR, 12% tied to Treasury rates and 9% tied to Federal Home Loan Bank rates.

Also contributing to the increase in yield on interest-earning assets was th e yield on the investment portfolio, which increased by 32 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance increased $60.4 million as growth in average deposits exceeded the funding needs for loan growth. The yield on interest-bearing deposits with banks decreased 79 basis points compared to the prior year as a result of lower interest rates, while the average balance decreased $108.2 million.

The cost of interest-bearing liabilities decreased to 2.55% for the year ended December 31, 2025, compared to 2.83% for the same period in 2024. The decrease of 20 basis points in the cost of interest-bearing deposits can be attributed to declines in

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market interest rates, which influenced the mix of deposits with growth in both money market accounts and time deposits. Average time deposits increased $213.3 million, or 13.8%, while the cost of these deposits decreased 52 basis points. Contributing to the average growth in time deposits was an average of $60.6 million acquired as part of the Center acquisition. Other interest-bearing deposits increased an average of $336.2 million, or 6.0%, while the cost of deposits decreased 14 basis points. Average growth in other-interest bearing deposits attributable to the Center acquisition totaled $98.1 million.

The cost of short-term borrowings decreased 93 basis points in comparison to the same period in the prior year. Average short-term borrowings decreased by $349.1 million for the year ended December 31, 2025 compared to the same period in 2024 primarily due to the payoff of $516.0 million in short-term borrowings related to the Federal Reserve Term Funding program in the fourth quarter of 2024. Average long-term debt increased $75.8 million as a result of a $127.0 million FHLB borrowing entered into in the fourth quarter of 2024, while the cost of long-term debt decreased by 44 basis points.

Comparing the year ended December 31, 2025 with the same period in 2024, changes in rates positively impacted net interest income by $28.9 million. The higher yield on interest-earning assets increased net interest income by $8.5 million, while the change in the cost of interest-bearing liabilities positively impacted net interest income by $20.4 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $18.3 million in the year ended December 31, 2025 compared to the same period in 2024. Higher levels of interest-earning assets resulted in an increase of $23.8 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $5.4 million, primarily due to growth in time and savings deposits.

Net interest income was positively impacted by a decrease of $136.8 million in average net free funds at December 31, 2025 as compared to December 31, 2024. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The higher level of net free funds was primarily the result of growth in noninterest-bearing demand deposits as well as higher average shareholders' equity due to retained earnings and stock issued for the Center acquisition.

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,

(dollars in thousands)

Interest income per Consolidated Statements of Income

Adjustment to fully taxable equivalent basis

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

Interest expense

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

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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

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

Tax-free investment securities

Taxable investment securities

Loans and leases, net of unearned

income (b)(c)(d)

Total interest-earning assets

Noninterest-earning assets:

Cash

Allowance for credit losses

Other assets

Total noninterest-earning assets

Total Assets

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing demand

deposits

Savings deposits

Time deposits

Short-term borrowings

Long-term debt

Total interest-bearing liabilities

Noninterest-bearing liabilities and shareholders’ equity:

Noninterest-bearing demand

deposits

Other liabilities

Shareholders’ equity

Total noninterest-bearing funding sources

Total Liabilities and Shareholders’ Equity

Net Interest Income and Net Yield on Interest-Earning Assets

(a) Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.

(b) Income on nonaccrual loans is accounted for on the cash basis, and the loan balances are included in interest-earning assets.

(c) Loan income includes loan fees.

(d) Includes held for sale loans.

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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

2025 Change from 2024

2024 Change from 2023

Total

Change

Change Due

To Volume

Change Due

To Rate (a)

Total

Change

Change Due

To Volume

Change Due

To Rate (a)

(dollars in thousands)

Interest-earning assets:

Interest-bearing deposits with banks

Tax-free investment securities

Taxable investment securities

Loans and leases

Total interest income (b)

Interest-bearing liabilities:

Interest-bearing demand deposits

Savings deposits

Time deposits

Short-term borrowings

Long-term debt

Total interest expense

Net interest income

(a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.

(b) Changes in interest income have been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.

Provision for Credit Losses

The provision for credit losses is determined based on management’s estimates of the appropriate level of the allowance for credit losses needed to provide for expected losses inherent in the loan and lease portfolio and off-balance sheet commitments. The provision for credit losses is an amount added to the allowance against which credit losses are charged.

The provision is a result of management's estimate of credit losses over the contractual life of the loan and lease portfolio. 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.

The provision for credit losses in 2025 totaled $36.7 million, reflecting an increase of $7.6 million compared to the $29.2 million provision recognized in 2024. Included in the provision expense for 2025 was $3.4 million in day 1 non-PCD expense and $0.3 million in expense related to off-balance sheet commitments related to the Center acquisition. Provision expense related to outstanding loans and leases, excluding the impact of the day 1 non-PCD expense in 2025, increased $3.1 million in 2025. The provision for off-balance sheet commitments increased $7.2 million in 2025 compared to 2024 as a result of higher off-balance sheet commitments related to commercial and residential construction loan commitments, as well as the impact of periodic updates, completed in the third quarter of 2025, related to the expected loss rates for these loan categories.

The level of provision expense in 2025 was primarily related to two loan categories: the commercial, financial, agricultural and other category and commercial real estate. These two categories accounted for $26.4 million of the $32.7 million total provision expense for loans and leases. Provision expense for the commercial, financial, agricultural and other category was $21.9 million in 2025 and included $8.5 million for a dealer floor plan relationship that was moved to noanccrual during the second quarter of 2025 as a result of being out of trust on sold vehicles. Also impacting this category was $8.0 million recognized related to the equipment finance portfolio as a result of $265.9 million, or 62%, loan growth in that category. Provision expense for the commercial real estate category was primarily a result of $4.7 million for the non-owner occupied real estate portfolio. Included in provision expense for the non-owner occupied portfolio was a $1.7 million specific reserve for a loan that was moved to nonaccrual in the fourth quarter of 2025. Additionally, the negative provisio n for the residential real estate category can be attributed to a slight increase of $18.6 million in outstanding loan balances offset by the impact of lower loss rates. The level of provision expense for loans to individuals is related to net charge-offs in that category, which totaled $5.5 million for

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the year ended December 31, 2025, including $4.0 million for indirect auto loans and $1.2 million related to other consumer loans.

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

Dollars

Percentage

Dollars

Percentage

(dollars in thousands)

Commercial, financial, agricultural and other

Time and demand

Commercial credit cards

Equipment finance

Time and demand other

Real estate construction

Construction other

Construction residential

Residential real estate

Residential first liens

Residential junior liens/home equity

Commercial real estate

Multifamily

Non-owner occupied

Owner occupied

Loans to individuals

Automobile and recreational vehicles

Consumer credit cards

Consumer other

Provision for credit losses on loans and leases

Provision for credit losses - acquisition day 1 non-PCD

Total provision for credit losses on loans and leases

Provision for off-balance sheet credit exposure

Total provision for credit losses

The allowance for credit losses was $125.8 million, or 1.32%, of total loans and leases outstanding at December 31, 2025, compared to $118.9 million, or 1.32%, at December 31, 2024. Nonperforming loans as a percentage of total loans increased to 0.97% at December 31, 2025 from 0.68% at December 31, 2024. The allowance to nonperforming loan ratio was 137.1% as of December 31, 2025 and 193.5% at December 31, 2024. Net charge-offs were $29.4 million for the year ended December 31, 2025 compared to $31.2 million for the same period in 2024, a decrease of $1.8 million. During 2025, $7.6 million in charge-offs were recognized as a result of the previously mentioned dealer floor plan loan and $5.6 million in charge-offs were recorded when certain commercial loans were moved to held for sale during the year.

Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at December 31, 2025.

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

(dollars in thousands)

Loans and leases outstanding at end of year

Average loans outstanding

Balance, beginning of year

Day 1 allowance for credit loss on PCD acquired loans

Provision for credit losses - acquisition day 1 non-PCD

Loans charged off:

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans charged off

Recoveries of loans previously charged off:

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total recoveries

Net charge-offs

Provision charged to expense

Balance, end of year

Ratios:

Net charge-offs as a percentage of average loans and leases outstanding

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

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Noninterest Income

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

2025 compared to 2024

$ Change

% Change

(dollars in thousands)

Noninterest Income:

Trust income

Service charges on deposit accounts

Insurance and retail brokerage commissions

Income from bank owned life insurance

Card-related interchange income

Swap fee income

Other income

Subtotal

Net securities losses

Gain on VISA exchange

Gain on sale of mortgage loans

Gain on sale of other loans and assets

Derivative mark to market

Total noninterest income

Total noninterest income (excluding net securities losses, gain on VISA exchange, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market), decreased $2.2 million, or 3%, in 2025. This decrease can be attributed to a $6.3 million decline in card-related interchange income resulting from the Company being subject to the Durbin Amendment to the Dodd-Frank Act beginning July 1, 2024. The Durbin Amendment is now applicable to the Company because its total assets exceeded $10.0 billion as of December 31, 2023. As a result, its curtailment of card-related interchange income went into effect on July 1, 2024.

Insurance and retail brokerage commissions increased by $1.1 million, or 10%, in 2025, primarily due to higher annuity sales, while Trust income increased $1.1 million, or 9%, due to revenue for assets under management. Swap fee income increased $0.7 million, compared to the prior period, as a result of a growth in new interest rate swaps entered into by our commercial loan customers.

Total noninterest income decreased $2.4 million, or 2%, in comparison to the year ended December 31, 2024. Gain on sale of mortgages increased $1.5 million as a result of changes in volume and spread received on mortgage loans sold, and gain on sale of other loans and assets decreased $2.2 million as a result of a decline in the volume and spread on the sale of SBA loans.

The most significant changes, other than the changes noted above, include gains on VISA exchange of $5.1 million and $5.7 million for the years ended December 31, 2025 and 2024, respectively, related to the conversion and sale of Visa shares. Offsetting these gains are $4.3 million and $5.4 million in losses recognized on the sale available for sale securities for 2025 and 2024, respectively, which were sold in order to reinvest into higher yielding investments.

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Noninterest Expense

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

2025 compared to 2024

$ Change

% Change

(dollars in thousands)

Noninterest Expense:

Salaries and employee benefits

Net occupancy

Furniture and equipment

Data processing

Advertising and promotion

Pennsylvania shares tax

Intangible amortization

Other professional fees and services

FDIC insurance

Other operating expenses

Subtotal

Loss on sale or write-down of assets

Litigation and operational losses

Loss on early redemption of subordinated debt

Merger and acquisition related

Total noninterest expense

Total noninterest expense increased $24.1 million compared to the year ended December 31, 2024. Salaries and employee benefits increased $14.7 million. Contributing to the higher salary expense in 2025 was a $7.7 million increase in incentive expense, of which $1.5 million can be attributed to finalizing payments related to prior year volumes and performance, with the remaining increase due to higher performance levels and sales volumes in 2025. Also impacting salary and benefit expense is a $1.9 million increase in 401(k) expense, a $1.1 million increase in FICA taxes and a higher number of full time equivalent employees, partially due to the Center acquisition. The number of full time equivalent employees totaled 1,512 at December 31, 2024, increasing to 1,567 at December 31, 2025.

Net occupancy expense increased $0.9 million due to additional properties acquired as part of the Center acquisition as well as increased snow removal expense.

Pennsylvania shares tax decreased $0.9 million compared to the year ended December 31, 2024 primarily due to higher income generated outside of Pennsylvania resulting from continued growth in our SBA and equipment finance loan portfolios.

Other operating expense increased $2.9 million compared to the prior period primarily due to loan-related appraisals, credit reporting and OREO expense. The increase in other professional fees and services is a result of services and advisors for several areas, none of which were individually material. Merger and acquisition related expenses increased $4.0 million compared to the prior period as a result of the Center acquisition which occurred in the second quarter of 2025.

Income Tax

The provision for income taxes of $39.1 million in 2025 reflects an increase of $3.4 million compared to the provision for income taxes in 2024 as a result of a $13.2 million increase in the level of income before taxes.

The effective tax rate was 20.4% and 20.0% for tax expense in 2025 and 2024, respectively. We ordinarily generate an annual effective tax rate that is less than the statutory rate due to benefits resulting from tax-exempt interest, income from bank owned life insurance, and tax benefits associated with low-income housing tax credits, all of which are relatively consistent regardless of the level of pretax income.

Financial Condition

First Commonwealth’s total assets increased $758.1 million as of December 31, 2025 compared to December 31, 2024. Loans and leases, including loans held for sale, increased $743.7 million. Contributing to the loan growth in 2025, including loans

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held for sale, were increases of $265.9 million in equipment finance loans, $231.3 million in commercial real estate loans and $107.0 million in automobile and recreational vehicle loans. Investment securities decreased $19.6 million, or 1%, and cash and interest-bearing balances with banks increased $47.0 million, or 35%.

First Commonwealth’s total liabilities increased $608.9 million in 2025. Deposits increased $573.0 million and long-term borrowings decreased $0.8 million. Short-term borrowings increased $67.8 million, or 85%.

Total shareholders' equity increased $149.2 million in 2025. The growth in shareholders' equity was the result of net income of $152.3 million, common stock issued for the Center acquisition of $45.9 million and a $37.9 million increase in accumulated other comprehensive income resulting from changes in the fair value of available for sale investments, offset by $55.5 million in dividends declared and $36.5 million in stock repurchases.

Loan and Lease Portfolio

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

Amount

Amount

Amount

Amount

Amount

(dollars in thousands)

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans and leases

The loan and lease portfolio, excluding loans held for sale, totaled $9.5 billion as of December 31, 2025, reflecting growth of $524.3 million compared to December 31, 2024. The Center acquisition contributed $292.6 million of this loan growth while the movement of a portfolio of loans to held for sale in the fourth quarter of 2025 negatively impacted the growth by $225.4 million. Commercial, financial, agricultural and other loans increased $367.0 million, or 22%, $265.9 million of which is a result of growth in the equipment finance portfolio and $92.5 million of which was the result of growth in time and demand loans. Residential real estate loans increased $18.6 million, or 1%, as $82.9 million growth from the Center acquisition was offset by runoff in the portfolio due to a higher percentage of new loans being originated for sale. Commercial real estate loans increased $57.4 million, or 2%, primarily due to growth in owner- and non-owner occupied properties. Growth in commercial real estate loans was impacted by the addition of $114.6 million acquired as part of the Center acquisition, offset by $173.9 million of loans moved to held for sale in the fourth quarter of 2025. Loans to individuals increased $101.9 million primarily due to growth in indirect auto and recreational vehicle loans.

Loans secured by 1-4 family residential properties in the process of foreclosure totaled $14.1 million at December 31, 2025 and $12.1 million at December 31, 2024.

The level of the loan portfolio in 2025 was impacted by the Center acquisition as well as the movement of a select portfolio of loans to held for sale. To better understand the changes to loan portfolio in 2025, the following table shows a breakdown of our loan portfolio between loans acquired through the Center acquisition and the portfolio moved to held for sale as of December 31, 2025 :

Legacy

Acquired (1)

Portfolio Moved to Held for Sale

Total

(dollars in thousands)

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans and leases

(1) Includes April 30, 2025 balance of loans acquired as part of the Center acquisition plus day 1 gross up of PCD loans.

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The majority of our loan and lease portfolio is with borrowers located in the states of Pennsylvania and Ohio. As of December 31, 2025 and 2024, there were no concentrations of loans relating to any industry in excess of 10% of total loans.

Final loan maturities and rate sensitivities of the loan portfolio excluding consumer installment and mortgage loans at December 31, 2025 were as follows:

Within

One Year

One to

5 Years

After

5 Years

Total

(dollars in thousands)

Commercial, financial, agricultural and other

Real estate construction (a)

Commercial real estate

Other

Total

Loans at fixed interest rates

Loans at variable interest rates

Total

(a) The maturities of real estate construction loans include term commitments that follow the construction period. Loans with these term commitments will be moved to the commercial real estate category when the construction phase of the project is completed.

First Commonwealth has a legal lending limit of $204.4 million to any one borrower or closely related group of borrowers, but has established lower thresholds for credit risk management.

Commercial real estate comprises 33% of our total loan portfolio. Commercial real estate loans are collateralized by real estate properties including, but not limited to, multifamily properties, office, retail, hotels and student housing. The following table summarizes the commercial real estate portfolio by type of property securing the credit as of December 31:

Amount

Amount

(dollars in thousands)

Land

Residential 1-4

Industrial and storage

Multifamily

Office

Healthcare

Student housing

Retail

Hospitality

Specialty use

Other

Total

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The following table represents our commercial real estate portfolio by type of property securing the credit as of December 31, 2025. Total non-pass commercial real estate loans increased by $17.7 million to $127.5 million when compared to December 31, 2024.

Pass

OAEM

Substandard Accruing

Substandard Nonaccruing

Total Non-Pass

Total

% Non-Pass

(dollars in thousands)

Land

Residential 1-4

Industrial and storage

Multifamily

Office

Healthcare

Student housing

Retail

Hospitality

Specialty use

Other

Total

The office portfolio comprises 14.8% of total commercial real estate loans and 25.0% of total commercial real estate non-pass loans. The average loan commitment size for the office portfolio is $0.9 million and the average outstanding balance as of December 31, 2025 is $0.9 million. Within the office portfolio, exposures over $1.0 million have an average debt service coverage ratio of 1.54x, which exceeds our internal guidelines of 1.25x to 1.50x, depending on property class. Additionally, for loans with exposure over $1.0 million, the office portfolio has a weighted average loan to value of 54% compared to internal guidelines of 60-75% depending on property class. Our current measure is based off of the most recent appraisal on file, the majority of which are from origination.

Portfolio segment limits are approved by our Board of Directors' Risk Committee. These segment limits incorporate loan commitments and are based off of total Tier 1 capital plus the allowable allowance for credit losses. In the second quarter of 2024, after considering the current environment and potential risks related to the office portfolio, the segment limit for the office portfolio was decreased from 65% to 50%, with the actual segment concentration at 32.4% as of December 31, 2025.

The following table summarizes commercial real estate loans by the location of the properties by which they are collateralized as of December 31, 2025. Some loans are collateralized by multiple properties spread over various states. In those instances the loan is included below based on the location of the primary property collateralizing the loan.

Balance

% of Total

(dollars in thousands)

Ohio

Pennsylvania

New Jersey

Indiana

Kentucky

New York

Other

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

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Nonperforming Loans

Nonperforming loans include nonaccrual loans and restructured loans. Nonaccrual loans represent loans on which interest accruals have been discontinued. Restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deteriorating financial position of the borrower under terms not available in the market.

We discontinue interest accruals on a loan when, based on current information and events, it is probable that we will be unable to fully collect principal or interest due according to the contractual terms of the loan. Consumer loans are placed in nonaccrual status at 150 days past due.  Other types of loans are typically placed in nonaccrual status when there is evidence of a significantly weakened financial condition or principal and interest is 90 days or more delinquent. Interest received on a nonaccrual loan is normally applied as a reduction to loan principal rather than interest income utilizing the cost recovery methodology of revenue recognition.

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

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

(dollars in thousands)

Nonperforming Loans:

Loans on nonaccrual basis

Troubled debt restructured loans on nonaccrual basis

Troubled debt restructured loans on accrual basis

Total nonperforming loans

Loans and leases past due in excess of 90 days and still accruing

Other real estate owned

Loans and leases outstanding at end of period

Average loans and leases outstanding

Nonperforming loans as a percentage of total loans and leases

Provision for credit losses on loans and leases

Provision for credit losses - acquisition day 1 non-PCD

Allowance for credit losses

Net charge-offs

Net charge-offs as a percentage of average loans and leases outstanding

Provision for credit losses on loans and leases as a percentage of net charge-offs (b)

Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (a)

Allowance for credit losses as a percentage of nonperforming loans (a)

Gross income that would have been recorded at original rates

Interest that was reflected in income

Net reduction to interest income due to nonaccrual

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

(b) Does not include provision for credit losses on loans and leases - acquisition day 1 non-PCD.

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Nonperforming loans increased $30.3 million to $91.8 million at December 31, 2025, compared to $61.5 million at December 31, 2024. During 2025, $94.1 million in loans were moved to nonaccrual, offset by $30.3 million in paydowns and payoffs, $5.8 million in sales, and $27.0 million in charge-offs. During 2025, two dealer floor plan relationships with balances of $13.8 million at December 31, 2025 were placed in nonaccrual status. The relationships totaled $41.4 million when placed in nonaccrual and subsequently the balances were reduced by $20.0 million in payments from the liquidation and sale of collateral and by $7.6 million in chargeoffs. In addition, $8.5 million in the new nonaccrual loans were the result of the Center acquisition. Nonperforming loans as a percentage of total loans increased to 0.97% from 0.68% at December 31, 2025 compared to December 31, 2024, respectively.

Net charge-offs were $29.4 million in 2025 compared to $31.2 million for the year 2024. The most significant credit losses recognized during the year include a $7.6 million charge-off recognized on a dealer floor plan relationship, $2.8 million recognized on nonperforming loans acquired from the Center acquisition, $7.0 million recognized on automobile and recreational vehicles and $1.8 million recognized on a non-owner occupied relationship loan. Included in the above charge-off detail is $7.4 million in charge-offs related to loans that were moved to held for sale during 2025. 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 99.7% for the year ended December 31, 2025 from 103.8% for the year ended December 31, 2024. This change was primarily driven by the $29.4 million in net charge-offs.

Allowance for Credit Losses

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

Allowance

Amount

Allowance

Amount

Allowance

Amount

Allowance

Amount

Allowance

Amount

(dollars in thousands)

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total

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

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

The allowance for credit losses increased $6.9 million from December 31, 2024 to December 31, 2025. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.32% at both December 31, 2025 and 2024, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans. Comparing December 31, 2025 to December 31, 2024, the general reserve for performing loans is 1.22% and 1.24%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans decreased from 13.0% of nonperforming loans at December 31, 2024 to 10.7% of nonperforming loans at December 31, 2025. The allowance for credit losses as a percentage of nonperforming loans was 137.1% and 193.5% at December 31, 2025 and 2024, respectively.

The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time. This estimate includes losses associated with specifically identified loans, as well as estimated credit losses inherent in the remainder of the loan portfolio. Additions are made to the allowance through both periodic provisions charged to income and recoveries of losses previously incurred. Reductions to the allowance occur as loans are charged off. Management evaluates the appropriateness of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to, assessment of historical loss experience, contractual payment schedules, prepayment estimates, calculated probability of default and loss given default estimates and forecasts of certain macroeconomic variables, such as unemployment, gross domestic product, housing price index, business bankruptcies as well as other macroeconomic variables. This evaluation is subjective and requires material estimates that may change over time. For a description of the methodology used to calculate the allowance for credit losses, please refer to “Critical Accounting Policies and Significant Accounting Estimates—Allowance for Credit Losses.”

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Investment Portfolio

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

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

(dollars in thousands)

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential

Other Government-Sponsored Enterprises

Obligations of States and Political Subdivisions

Corporate Securities

Total Securities Available for Sale

As of December 31, 2025, securities available for sale had a fair value of $1.0 billion. Gross unrealized gains were $5.7 million and gross unrealized losses were $87.7 million. The level of gross unrealized losses is directly related to the increase in market interest rates.

The securities available for sale portfolio decreased $133.4 million, or 12%, as of December 31, 2025 compared to December 31, 2024, as deposit growth provided additional liquidity which exceeded funding needs of the loan portfolio. Most of the run off in this portfolio is related to the sales, paydown and maturity of mortgage-backed securities. These securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits.

The following is a schedule of the contractual maturity distribution of securities available for sale at December 31, 2025.

Government

Agencies and

Corporations

States and

Political

Subdivisions

Other

Securities

Total

Amortized

Cost (a)

Weighted

Average

Yield (b)

(dollars in thousands)

Within 1 year

After 1 but within 5 years

After 5 but within 10 years

After 10 years

Total

(a) Equities are excluded from this schedule because they have an indefinite maturity.

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

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

The available for sale investment portfolio amortized cost decreased $171.5 million, or 14%, at December 31, 2025 compared to 2024. Purchases of available for sale investments totaled $162.1 million during 2025 and calls or maturities totaled $282.7 million. The level of purchases were impacted by liquidity available from increased deposits. Liquidity provided from sales, calls and maturities was utilized to fund growth in the loan portfolio or reinvested into investment securities and interest-bearing deposits with banks.

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

(dollars in thousands)

Obligations of U.S. Government Agencies:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Obligations of U.S. Government-Sponsored Enterprises:

Mortgage-Backed Securities—Residential

Mortgage-Backed Securities—Commercial

Other Government-Sponsored Enterprises

Obligations of States and Political Subdivisions

Debt Securities Issued by Foreign Governments

Total Securities Held to Maturity

The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2025.

Government

Agencies and

Corporations

States and

Political

Subdivisions

Other

Securities

Total

Amortized

Cost

Weighted

Average

Yield (a)

(dollars in thousands)

Within 1 year

After 1 but within 5 years

After 5 but within 10 years

After 10 years

Total

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

The held to maturity investment portfolio increased $113.8 million, or 28%, at December 31, 2025 compared to 2024. Held to maturity investment purchases of $192.5 million were offset by the calls or maturities of $78.3 million in investments.

See Note 8 “Investment Securities" and Note 18 “Fair Values of Assets and Liabilities” for additional information related to the investment portfolio.

Deposits

Total deposits increased $573.0 million in 2025. Interest-bearing demand and savings deposits increased $359.3 million, noninterest-bearing demand deposits increased $123.2 million and time deposits increased $90.5 million. The growth and changes in the mix of deposits in 2025 was impacted by $278.0 million in deposits acquired as part of the Center acquisition.

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The following table shows a breakdown of the components of First Commonwealth’s deposits as of the end of the year in the two-year period ending December 31:

Originated

Acquired (a)

Amount

Amount (b)

(dollars in thousands)

Noninterest-bearing deposits

Interest-bearing demand deposits

Savings deposits

Time deposits

Total deposits

(a) Reflects the deposit balances, including purchase accounting marks, of deposits acquired from Center as of the acquisition date of April 30, 2025.

(b) Category totals have been reclassified to remove the impact of the internal sweep program.

In the table above, compared to amounts previously disclosed, deposits for December 31, 2024 reflect a reclassification of $1.2

billion out of savings deposits into interest-bearing demand deposits. This reclassification removes the impact of an internal

sweep program that has historically been in place for regulatory reserve requirements. In the second quarter of 2025, the

internal sweep program was terminated; therefore, for consistency purposes, interest-bearing demand deposits and savings

deposits for periods prior to June 30, 2025 are now shown without the deposit reclassification.

The level of deposits during any period is influenced by factors outside of management’s control, such as the level of short-term

and long-term market interest rates and yields offered on competing investments, such as money market mutual funds.

For additional information concerning our deposits, please refer to Note 14 “Interest-Bearing Deposits.”

At December 31, 2025 and 2024, time deposits of $100 thousand or more totaled $1,061.4 million and $1,018.3 million, respectively. Time deposits of $250 thousand or more had remaining maturities as follows as of the end of each year in the two-year period ended December 31:

Amount

Amount

(dollars in thousands)

3 months or less

Over 3 months through 6 months

Over 6 months through 12 months

Over 12 months

Total

The estimated total amount of uninsured deposits was $2.9 billion and $2.6 billion at December 31, 2025 and 2024, respectively, of which $0.8 billion and $0.7 billion were secured by pledged investment securities or letters of credit at December 31, 2025 and 2024, respectively. 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 $67.8 million, or 85%, from $80.1 million at December 31, 2024 to $148.0 million at December 31, 2025. Long-term debt decreased $1.2 million, from $263.0 million at December 31, 2024 to $261.7 million at December 31, 2025. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 15 “Short-term Borrowings,” Note 16 “Subordinated Debentures” and Note 17 “Other Long-term Debt” of the Consolidated Financial Statements.

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Contractual Obligations and Off-Balance Sheet Arrangements

The table below sets forth our contractual obligations to make future payments as of December 31, 2025. For a more detailed description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table below.

Footnote

Number

Reference

1 Year

or Less

After 1

But Within

3 Years

After 3

But Within

5 Years

After 5

Years

Total

(dollars in thousands)

FHLB advances

Subordinated debentures

Operating leases

Total contractual obligations

The table above excludes our cash obligations upon maturity of certificates of deposit, which is set forth in Note 14 “Interest-Bearing Deposits” of the Consolidated Financial Statements.

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, 2025. Commitments to extend credit, standby letters of credit and commercial letters of credit do not necessarily represent future cash requirements since it is unknown if the borrower will draw upon these commitments and often these commitments expire without being drawn upon. As of December 31, 2025, a reserve for expected credit losses of $8.2 million was recorded for unused commitments and letters of credit.

Liquidity

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs, with cost-effective funding. Liquidity risk arises from the possibility that we may not be able to meet our financial obligations and operating cash needs or may become overly reliant upon external funding sources. In order to manage this risk, our Board of Directors has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity requirements based on limits approved by our Board of Directors. This policy designates our Asset/Liability Committee (“ALCO”) as the body responsible for meeting these objectives. The ALCO, which includes members of executive management, reviews liquidity on a periodic basis and approves significant changes in strategies that affect balance sheet or cash flow positions. Liquidity is centrally managed on a daily basis by our Treasury Department, which monitors it by using such measures as a 30-day liquidity stress analysis, liquidity gap ratios and noncore funding ratios.

We generate funds to meet our cash flow needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. The level of deposits during any period is sometimes influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds. Deposits increased $573.0 million during 2025, and comprised 95% of total liabilities at both December 31, 2025 and 2024. Proceeds from the sale, maturity and redemption of investment securities totaled $429.4 million during 2025 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.

The following represents our expanded sources of liquidity as of December 31, 2025:

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Total Available

Amount Used

Outstanding Letters of Credit

Net Available

(dollars in thousands)

Internal liquidity sources

Unencumbered securities

Other (excess pledged)

External liquidity sources

FHLB advances

FRB borrowings

Lines with other financial institutions

CDARS (1)

Total liquidity

(1) Reflects internal policy limit. Maximum capacity with CDARs is $1.8 billion.

Our participation in the Certificate of Deposit Account Registry Services ("CDARS") program is part of an ALCO strategy to increase and diversify funding sources. As of December 31, 2025, the outstanding CDARS balance of $15.0 million carried an average weighted rate of 2.93% and an average original term of 322 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

Liquidity available through the Federal Reserve is a result of the FRB Borrower-in-Custody of Collateral program, which enables us to take certain loans that are not being used as collateral at the FHLB and pledge them as collateral for borrowings at the FRB.

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

Market Risk

Market risk refers to potential losses arising from 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. Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options” within asset and liability products as certain borrowers have the option to prepay their loans when rates fall, while certain depositors can redeem or withdraw their deposits early when rates rise.

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

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

The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate sensitive assets to rate sensitive liabilities repricing within a one-year period was 0.70 and 0.68 at December 31, 2025 and 2024, respectively. A ratio of less than one indicates a higher level of repricing liabilities over repricing assets over the next twelve months. The level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year.

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Following is the gap analysis as of December 31:

0-90 Days

Days

Days

Cumulative

0-365 Days

Over 1 Year

Through 5

Years

Over 5

Years

(dollars in thousands)

Loans and leases

Investments

Other interest-earning assets

Total interest-sensitive assets (ISA)

Certificates of deposit

Other deposits

Borrowings

Total interest-sensitive liabilities (ISL)

Gap

ISA/ISL

Gap/Total assets

0-90 Days

Days

Days

Cumulative

0-365 Days

Over 1 Year

Through 5

Years

Over 5

Years

(dollars in thousands)

Loans and leases

Investments

Other interest-earning assets

Total interest-sensitive assets (ISA)

Certificates of deposit

Other deposits

Borrowings

Total interest-sensitive liabilities (ISL)

Gap

ISA/ISL

Gap/Total assets

Gap analysis has limitations due to the static nature of the model, which holds volumes and consumer behaviors constant in all economic and interest rate scenarios. A lower level of rate sensitive assets to rate sensitive liabilities repricing in one year could indicate reduced net interest income in a rising interest rate scenario, and conversely, increased net interest income in a declining interest rate scenario. However, the gap analysis incorporates only the level of interest-earning assets and interest-bearing liabilities and not the sensitivity each has to changes in interest rates. The impact of the sensitivity to changes in interest rates is provided in the table below.

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The following table presents an analysis of the potential sensitivity of our annual net interest income to gradual changes in interest rates over a 12-month time frame as compared with net interest income if rates remained unchanged and there are no changes in balance sheet categories.

Net interest income change (12 months) for basis point movements of:

(dollars in thousands)

December 31, 2025 ($)

December 31, 2025 (%)

December 31, 2024 ($)

December 31, 2024 (%)

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

Net interest income change (12 months) for basis point movements of:

(dollars in thousands)

December 31, 2025 ($)

December 31, 2025 (%)

December 31, 2024 ($)

December 31, 2024 (%)

The Company evaluates its potential interest rate sensitivity by utilizing several interest rate scenarios that incorporate both

rising and declining rates. Results of these scenarios are impacted by variables that include the current level of interest rates,

product characteristics such as floors and ceilings, the frequency with which variable rate products reset their rates, and

projected pricing changes for non-maturity deposits. For example, the results in a declining rate scenario could be affected by

the model's use of an assumed interest rate floor of zero. For the years 2025 and 2024, the cost of our interest-bearing liabilities averaged 2.55% and 2.83%, respectively, and the yield on our average interest-earning assets, on a fully taxable equivalent basis, averaged 5.70% and 5.62%, respectively.

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

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

Credit Risk

Management of credit risk within our loan and lease portfolio is a focus of the Company and is a continuous process in order to address changing economic and lending environments. In order to identify and manage credit risk, segment and concentration limits are established and approved by our Board of Directors’ Risk Committee in order to maintain alignment with our credit risk appetite, loan strategic plan, loan policy and underwriting guidelines. In addition, our Credit Department completes industry studies to identify potential risk in the portfolio. For example, within the commercial real estate portfolio, industry studies are completed for the following sectors: hospitality, industrial, multifamily, office, retail, senior living, healthcare and student housing.

On an annual basis, the Credit Department also reviews the commercial real estate portfolio as a whole, along with underwriting practices and loan level stress testing procedures, to enhance risk management practices and monitor commercial real estate

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concentrations. This review provides an overview of the portfolio to ensure that emerging risks have been identified, and documents and validates the standard interest rate and capitalization rate stress scenarios.

First Commonwealth maintains an allowance for credit losses at a level deemed sufficient for losses inherent in the loan and lease portfolio at the date of each statement of financial condition. Management reviews the appropriateness of the allowance on a quarterly basis to ensure that the provision for credit losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is appropriate based on management’s assessment of estimated expected losses.

First Commonwealth’s methodology for assessing the appropriateness of the allowance for credit losses consists of several key elements. These elements include an assessment of individual nonperforming loans with a balance greater than $250 thousand, loss experience trends and other relevant factors.

First Commonwealth also maintains a reserve for unfunded loan commitments and letters of credit based upon credit risk and probability of funding. The reserve totaled $8.2 million at December 31, 2025 and is classified in “Other liabilities” on the Consolidated Statements of Financial Condition.

We discontinue interest accruals on a loan when, based on current information and events, it is probable that we will be unable to fully collect principal or interest due according to the contractual terms of the loan. A loan is also placed in nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due. Consumer loans related to automobile and recreational vehicles are either charged off or repossessed at not later than 90 days past due.

Nonperforming loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The probable risk of loss on these loans is evaluated by comparing the loan balance to the estimated fair value of any underlying collateral or the present value of projected future cash flows. Losses or specifically assigned allowance for credit losses are recognized where appropriate. Nonperforming loans increased $30.3 million at December 31, 2025 compared to the prior year.

The allowance for credit losses was $125.8 million at December 31, 2025, or 1.32% of loans outstanding, compared to $118.9 million, or 1.32% of loans outstanding, at December 31, 2024. Credit measures as of December 31, 2025 as compared to December 31, 2024 reflect an increase in the level of criticized loans of $43.0 million, from $224.2 million at December 31, 2024 to $267.2 million at December 31, 2025. Commercial, financial, agricultural and other loans and commercial real estate loans accounted for $21.7 million and $17.7 million, respectively, of this increase. Classified assets increased $43.1 million, from $96.3 million at December 31, 2024 to $139.4 million at December 31, 2025. Commercial, financial, agricultural and other loans and commercial real estate loans accounted for $33.9 million and $9.0 million, respectively, of this increase. Delinquency on accruing loans increased $14.9 million, or 67%, compared to the prior year primarily due to an increase of $9.3 million in commercial real estate loan delinquency.

The allowance for credit losses as a percentage of nonperforming loans was 137.1% at December 31, 2025 and 193.5% as of December 31, 2024. The allowance for credit losses includes specific allocations of $9.8 million related to nonperforming loans covering 11% of the total nonperforming balance at December 31, 2025 and specific allocations of $8.0 million covering 13% of the total nonperforming balance at December 31, 2024. The amount of allowance related to individually analyzed 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 new nonperforming loans.

Management believes that the allowance for credit losses is at a level that is sufficient to absorb expected losses in the loan and lease portfolio at December 31, 2025.

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

For the Period Ended December 31, 2025

As of December 31, 2025

Net

Charge-offs

Total Net

Charge-

offs

Net

Charge-offs

of Average

Loans

Nonperforming

Loans

% of Total

Nonperforming

Loans

Nonperforming

Loans as a % of

Total Loans

(dollars in thousands)

Commercial, financial, agricultural and other

Real estate construction

Residential real estate

Commercial real estate

Loans to individuals

Total loans and leases, net of unearned income

As indicated in the above table, commercial real estate and commercial financial, agricultural and other loans were the most significant portions of the nonperforming loans as of December 31, 2025. Included in nonaccrual loans as of December 31, 2025 are $10.3 million in loans that were on nonaccrual at the time of the Center or Centric acquisitions. See discussions related to the provision for credit losses and loans for more information.

New Accounting Pronouncements

New accounting pronouncements recently issued or proposed by the Financial Accounting Standards Board ("FASB") but not yet adopted as of December 31, 2025 are discussed below.

In November 2024, Accounting Standards Update 2024-03 ("ASU 2024-03"), “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures" (Subtopic 220-40) was issued. ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 will be effective for us, on a prospective basis, for annual periods beginning in 2027, and interim periods within fiscal years beginning in 2028, though early adoption and retrospective application is permitted. ASU 2024-03 is not expected to have a significant impact on our financial conditions or results of operations.

In September 2025, Accounting Standard Update 2025-06 ("ASU 2025-06"),“Intangibles - Goodwill and Other - Internal-Use Software" (Subtopic 350-40) was issued. A S U 2025-06 simplifies the accounting for internal-use software by removing project development stages and introducing a new capitalization threshold. Under the revised standard, software development costs are capitalized when management authorizes and commits funding for the project and it is probable the software will be completed and used as intended. ASU 2025-05 will be effective in 2028 and is not expected to have a significant impact on our financial conditions or results of operations.

In November 2025, Accounting Standard Update 2025‑08 ("ASU 2025-08"), “Financial Instruments - Credit Losses" (Topic 326) was issued. ASU 2025-08 expands the scope of acquired financial assets subject to the gross up approach formerly applicable only to purchased credit‑deteriorated ("PCD") assets, to include acquired non‑PCD loans that meet certain criteria, now referred to as “purchased seasoned loans” (PSLs). Under this model, an allowance for expected credit losses is recognized at acquisition, offsetting the loan’s amortized cost basis, thereby eliminating the day-one credit‑loss expense previously required for non‑PCD assets. PSLs are defined as non‑PCD loans acquired either (i) through a business combination, or (ii) purchased more than 90 days after origination when the acquirer was not involved in origination. ASU 2025-08 will be effective on a prospective basis for loans acquired on or after the adoption date, for interim and annual reporting periods beginning in 2027, though early adoption is permitted. The Company is evaluating the expected impact on accounting for acquired assets related to future transactions.

In November 2025, Accounting Standard Update 2025‑09 ("ASU 2025-09"), “Derivatives and Hedging" (Topic 815) was issued. This update allows designating a variable price component of a nonfinancial forecasted purchase or sale as the hedged risk, grouping individual forecasted transactions with similar (not identical) risk exposures, a new model for hedging forecasted interest on variable-rate debt, enabling changes in index or tenor without de-designation, subject to simplifying assumptions, and additional clarifications related to hedge accounting of nonfinancial components, net written options, and dual-hedge strategies. ASU 2025-09 will be effective beginning in 2027, though early adoption is permitted. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

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