# First Commonwealth Financial Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [First Commonwealth Financial Corp](/companies/fcf.md) (CIK 712537)
- Form: 10-Q
- Filed: 2023-11-07
- Accepted by EDGAR: Nov 7, 2023, 16:28 ET
- Period: 2023-09-30
- Accession: 0000712537-23-000112
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712537/000071253723000112/fcf-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712537/000071253723000112/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $42.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $95.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $10.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $28.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $39.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $112.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.38 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.38 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 102,442,878 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 101,674,970 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $106.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $38.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $14.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2023-09-30 | $11.42bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $10.18bn | us-gaap:Liabilities |
| Short-term borrowings | at 2023-09-30 | $544.1m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $1.24bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 5,030 characters.

current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.

#### Results of Operations

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

#### Net Income

For the three months ended September 30, 2023, First Commonwealth recognized net income of $39.2 million, or $0.38 diluted earnings per share, compared to net income of $34.0 million, or $0.36 diluted earnings per share, in the three months ended September 30, 2022. The increase in net income was primarily the result of a $15.4 million increase in net interest income offset by a $7.5 million increase in noninterest expense.

For the three months ended September 30, 2023, the Company’s return on average equity was 12.46% and its return on average assets was 1.38%, compared to 12.67% and 1.41%, respectively, for the three months ended September 30, 2022.

#### Net Interest Income

Net interest income, on a fully taxable equivalent basis, was $98.1 million in the third quarter of 2023, compared to $82.6 million for the same period in 2022. Accretion of purchase accounting marks related to the Centric acquisition contributed 10 basis points to the net interest margin in the third quarter of 2023. Net interest income comprises the majority of our operating revenue (i.e., net interest income before provision expense plus noninterest income), at 79.7% and 76.1% for the three months ended September 30, 2023 and 2022, respectively.

The net interest margin, on a fully taxable equivalent basis, was 3.76% for both the three months ended September 30, 2023 and 2022.

The taxable equivalent yield on interest-earning assets was 5.37% for the three months ended September 30, 2023, an increase of 145 basis points compared to the 3.92% yield for the same period in 2022. This is largely due to a 148 basis point increase in the loan portfolio yield when compared to the three months ended September 30, 2022 as a result of a higher interest rate environment in 2023. Contributing to this increase was the yield on our adjustable and variable rate commercial loan portfolios, which increased 231 basis points largely due to the Federal Reserve increasing short term interest rates by 225 basis points since September 30, 2022. Additionally, nine basis points of the increase in the yield on interest-earnings assets can be attributed to the recognition of $2.4 million in accretion of purchase accounting marks, primarily as a result of the Centric acquisition.

The investment portfolio yield increased 42 basis points in comparison to the prior year as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $110.2 million as maturities and runoff funded loan growth. The average balance of interest-bearing deposits with banks increased from $106.8 million in 2022 to $235.8 million in 2023 while the yield increased 349 basis points.

The cost of interest-bearing liabilities increased to 2.28% for the three months ended September 30, 2023, from 0.24% for the same period in 2022, primarily due to an increase in the cost of time deposits and savings deposits. The cost of interest-bearing deposits increased 145 basis points and short-term borrowings increased 504 basis points in comparison to the same period last year. The increase in cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates on money market and time deposits. Comparing the three months ended September 30, 2023 with the comparable period in 2022, average time deposits increased $717.9 million, or 213.4%, with an increase in the cost of these deposits of 324 basis points. Contributing to the average growth in time deposits was an average of $89.1 million related to the Centric acquisition. Other interest-bearing deposits increased on average $629.3 million, or 12.7%, compared to the three months ended September 30, 2022 and the cost of these deposits increased 160 basis points. The Centric acquisition contributed $374.0 million of the growth in other interest-bearing deposits.

For the three months ended September 30, 2023, changes in interest rates negatively impacted net interest income by $1.6 million when compared with the same period in 2022. The higher yield on loans contributed to interest-earning assets positively impacting net interest income by $36.4 million, while an increase in the cost of interest-bearing liabilities negatively impacted net interest income by $38.0 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $17.0 million during the three months ended September 30, 2023, as compared to the same period in 2022. The mix of interest-earning assets resulted in an increase of $17.8 million in interest income, while changes in the volume and mix of interest-

## 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, 2,022 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, 2022, except for the following risk factor.

### Risks Related to Recent Events Impacting the Financial Services Industry

Recent events impacting the financial services industry, including the failure of Silicon Valley Bank and Signature Bank, have resulted in decreased confidence in banks among some consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These recent events have, and could continue to have, an adverse impact on the market price and volatility of the Company’s common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business. Inability to access short-term funding, loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization. We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses. The cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

Filed Nov 7, 2023.
Source: SEC EDGAR, the filing index for accession 0000712537-23-000112. Last ingested by Listed: Nov 6, 2026, 18:15 ET. No prices; not investment advice.