# First Commonwealth Financial Corp: Form 10-Q for the period ended Jun 30, 2020

- Company: [First Commonwealth Financial Corp](/companies/fcf.md) (CIK 712537)
- Form: 10-Q
- Filed: 2020-08-10
- Accepted by EDGAR: Aug 10, 2020, 08:53 ET
- Period: 2020-06-30
- Accession: 0000712537-20-000020
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712537/000071253720000020/fcf-20200630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712537/000071253720000020/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2020-04-01 to 2020-06-30 | $8.3m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2020-01-01 to 2020-06-30 | $19.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-04-01 to 2020-06-30 | $5.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-01-01 to 2020-06-30 | $6.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | $23.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | $28.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.24 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | $0.29 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.24 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-01-01 to 2020-06-30 | $0.29 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-04-01 to 2020-06-30 | 98,146,854 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-01-01 to 2020-06-30 | 98,254,429 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | $51.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2020-01-01 to 2020-06-30 | $21.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2020-01-01 to 2020-06-30 | $5.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-06-30 | $457.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2020-06-30 | $9.36bn | us-gaap:Assets |
| Total liabilities | at 2020-06-30 | $8.29bn | us-gaap:Liabilities |
| Long-term debt | at 2020-06-30 | $233.7m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2020-06-30 | $108.5m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2020-06-30 | $1.08bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 6,049 characters.

the borrower, who could not obtain comparable terms from alternative financing sources. In the first six months of 2020, 16 loans totaling $0.5 million were identified as troubled debt restructurings.

The balance of troubled debt restructured loans decreased $2.5 million from December 31, 2019. Changes during the first six months of 2020 can be attributed to new restructurings in conjunction with bankruptcy offset by payments received on existing troubled debt restructured loans, including the $1.9 million payoff of a commercial loan relationship. Please refer to Note 8 “Loans and Allowance for Credit Losses,” for additional information on troubled debt restructurings.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. These modifications typically provide for the deferral of both principal and interest for 90 days. The CARES Act, along with a joint agency statement issued by banking regulators, provides that short-term modifications of up to 180 days made in response to COVID-19 do not need to be accounted for as a TDR. As of July 24, 2020, the Company has granted approximately 6,500 deferrals to its customers with aggregate principal balances of $1.4 billion. Payment deferrals granted on approximately 6,300 accounts or $1.2 billion in balances have expired as of July 24th, 2020. It is likely that some of these deferrals will be extended for an additional 90 days in order to provide support for certain COVID-19 impacted customers.

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

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

Nonperforming loans, including loans held for sale, increased $23.8 million to $56.0 million at June 30, 2020 compared to $32.2 million at December 31, 2019. During the six months ended June 30, 2020, $38.6 million of loans were moved to nonaccrual including the transfer of five commercial real estate relationships totaling $28.8 million and one commercial, financial, agricultural and other relationship totaling $5.5 million. Offsetting these additions was a $3.9 million payoff of a commercial real estate relationship, a $1.9 million payoff of a commercial, financial, agricultural and other relationship and a $2.3 million paydown of a commercial, financial, agricultural and other relationship.

The allowance for credit losses as a percentage of nonperforming loans was 145.37% as of June 30, 2020, compared to 160.28% at December 31, 2019, and 143.62% at June 30, 2019. The amount of specific reserves included in the allowance for nonperforming loans was determined by using fair values obtained from current appraisals and updated discounted cash flow analyses. The allowance for credit losses includes specific reserves of $6.9 million and general reserves of $74.5 million as of June 30, 2020. Specific reserves increased $4.5 million from December 31, 2019, and $4.4 million from June 30, 2019. The increase from both periods is primarily due to specific reserves of $5.9 million added on the $28.8 million in new commercial real estate nonaccrual loans. Offsetting this was a $0.9 million decrease in specific reserves related to commercial, financial, agricultural and other loans and an $0.8 million decrease related to commercial real estate loans due to the aforementioned payoffs. Management believes that the allowance for credit losses is at a level deemed sufficient to absorb losses inherent in the loan portfolio at June 30, 2020.

Criticized loans totaled $125.4 million at June 30, 2020 and represented 1.8% of the loan portfolio. The level of criticized loans increased as of June 30, 2020 when compared to December 31, 2019, by $24.8 million, or 24.7%. Classified loans totaled $76.9 million at June 30, 2020 compared to $52.0 million at December 31, 2019, an increase of $24.9 million, or 47.8%. The increase in criticized loans is primarily the result of the aforementioned changes in nonperforming loans. Delinquency on accruing loans for the same period decreased $6.0 million, or 44.3%, the majority of which are residential real estate loans.

The allowance for credit losses was $81.4 million at June 30, 2020, or 1.18% of total loans outstanding, compared to 0.83% reported at December 31, 2019, and 0.85% at June 30, 2019. General reserves, or the portion of the allowance related to loans that were not specifically evaluated for impairment, as a percentage of non-impaired loans were 1.09% at June 30, 2020 compared to 0.80% at December 31, 2019 and 0.81% at June 30, 2019. General reserves as a percentage of non-impaired originated loans were 1.15% at June 30, 2020 compared to 0.87% at December 31, 2019 and 0.88% at June 30, 2019. The increase in the general reserve for both periods is reflective of higher qualitative reserves maintained at June 30, 2020 as a result of the COVID-19 pandemic. These reserves were increased in order to provide for risks related to the uncertain economic environment, the large volume of consumer forbearances granted as of June 30, 2020 as a result of COVID-19 as well as consideration of the probable losses incurred in certain loan categories, such as hospitality and retail.

## Market risk

As filed, 133 characters.

Information appearing in Item 2 of this report under the caption “Market Risk” is incorporated by reference in response to this item.

## Controls and procedures

As filed, 844 characters.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission.

## Risk factors

As filed, 285 characters.

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Filed Aug 10, 2020.
Source: SEC EDGAR, the filing index for accession 0000712537-20-000020. Last ingested by Listed: Nov 6, 2026, 18:15 ET. No prices; not investment advice.