UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number 001-11138

First Commonwealth Financial Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania		25-1428528
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
601 Philadelphia Street
Indiana	PA	15701
(Address of principal executive offices)		(Zip Code)

724-349-7220

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Smaller reporting company ☐ Emerging growth company  ☐

Non-accelerated filer  ¨ (Do not check if a smaller reporting company) 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No x

The number of shares outstanding of issuer’s common stock, $1.00 par value, as of November 5, 2019, was 98,316,233.

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

INDEX

		PAGE
PART I.	Financial Information
ITEM 1.	Financial Statements and Supplementary Data
	Included in Part I of this report:
	First Commonwealth Financial Corporation and Subsidiaries
	Consolidated Statements of Financial Condition (Unaudited)	3
	Consolidated Statements of Income (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Unaudited)	5
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	6
	Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to the Unaudited Consolidated Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	70
ITEM 4.	Controls and Procedures	70
PART II.	Other Information
ITEM 1.	Legal Proceedings	71
ITEM 1A.	Risk Factors	71
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
ITEM 3.	Defaults Upon Senior Securities	71
ITEM 4.	Mine Safety Disclosures	71
ITEM 5.	Other Information	71
ITEM 6.	Exhibits	72
	Signatures	73

2

ITEM 1. Financial Statements and Supplementary Data

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2019			December 31, 2018
	(Unaudited)
	(dollars in thousands, except share data)
Assets
Cash and due from banks	$	112,241		$	95,934
Interest-bearing bank deposits	16,408			3,013
Securities available for sale, at fair value	812,383			909,247
Securities held to maturity, at amortized cost (Fair value of $360,224 and $383,993 at September 30, 2019 and December 31, 2018, respectively)	357,890			393,855
Other investments	11,561			32,126
Loans held for sale	20,288			11,881
Loans:
Portfolio loans	6,099,561			5,774,139
Allowance for credit losses	(50,035		)	(47,764		)
Net loans	6,049,526			5,726,375
Premises and equipment, net	138,112			80,474
Other real estate owned	1,622			3,935
Goodwill	303,632			274,202
Amortizing intangibles, net	16,873			13,038
Bank owned life insurance	219,685			215,766
Other assets	91,806			68,409
Total assets	$	8,152,027		$	7,828,255
Liabilities
Deposits (all domestic):
Noninterest-bearing	$	1,657,507		$	1,466,213
Interest-bearing	5,020,489			4,431,779
Total deposits	6,677,996			5,897,992
Short-term borrowings	83,735			721,823
Subordinated debentures	170,409			170,288
Other long-term debt	57,078			7,551
Capital lease obligation	6,917			7,217
Total long-term debt	234,404			185,056
Other liabilities	116,862			47,995
Total liabilities	7,112,997			6,852,866
Shareholders’ Equity
Preferred stock, $1 par value per share, 3,000,000 shares authorized, none issued	—			—
Common stock, $1 par value per share, 200,000,000 shares authorized; 113,914,902 shares issued at September 30, 2019 and December 31, 2018, and 98,319,081 and 98,518,668 shares outstanding at September 30, 2019 and December 31, 2018, respectively	113,915			113,915
Additional paid-in capital	493,737			492,273
Retained earnings	560,360			511,409
Accumulated other comprehensive income (loss), net	6,077			(11,341		)
Treasury stock (15,595,821 and 15,396,234 shares at September 30, 2019 and December 31, 2018, respectively)	(135,059		)	(130,867		)
Total shareholders’ equity	1,039,030			975,389
Total liabilities and shareholders’ equity	$	8,152,027		$	7,828,255

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2019			2018		2019			2018
	(dollars in thousands, except share data)
Interest Income
Interest and fees on loans	$	74,714		$	66,105	$	218,524		$	188,529
Interest and dividends on investments:
Taxable interest	6,995			7,899		22,871			23,031
Interest exempt from federal income taxes	398			410		1,231			1,231
Dividends	387			420		1,419			1,412
Interest on bank deposits	81			39		181			109
Total interest income	82,575			74,873		244,226			214,312
Interest Expense
Interest on deposits	9,846			6,006		27,298			14,639
Interest on short-term borrowings	1,620			2,603		8,075			7,387
Interest on subordinated debentures	2,232			2,302		6,930			4,664
Interest on other long-term debt	362			76		656			228
Interest on lease obligations	70			73		210			221
Total interest expense	14,130			11,060		43,169			27,139
Net Interest Income	68,445			63,813		201,057			187,173
Provision for credit losses	2,708			2,961		9,638			11,032
Net Interest Income after Provision for Credit Losses	65,737			60,852		191,419			176,141
Noninterest Income
Net securities gains	9			—		15			8,102
Trust income	2,325			2,206		6,221			6,014
Service charges on deposit accounts	4,954			4,589		13,792			13,418
Insurance and retail brokerage commissions	1,912			1,872		5,887			5,560
Income from bank owned life insurance	1,540			1,579		4,408			5,241
Gain on sale of mortgage loans	2,599			1,542		6,101			4,267
Gain on sale of other loans and assets	970			643		3,831			3,548
Card-related interchange income	5,629			5,044		15,800			14,929
Derivatives mark to market	(45		)	—		(88		)	789
Swap fee income	421			528		1,634			1,115
Other income	1,865			1,754		5,356			5,125
Total noninterest income	22,179			19,757		62,957			68,108
Noninterest Expense
Salaries and employee benefits	28,674			26,553		83,205			77,580
Net occupancy	4,521			4,341		13,878			12,932
Furniture and equipment	3,904			3,424		11,396			10,611
Data processing	2,825			2,853		7,988			7,764
Advertising and promotion	1,140			1,200		3,611			3,185
Pennsylvania shares tax	1,189			1,248		3,365			3,398
Intangible amortization	865			817		2,364			2,430
Collection and repossession	649			630		1,656			2,060
Other professional fees and services	969			962		2,755			3,000
FDIC insurance	35			217		1,164			1,590
Loss on sale or write-down of assets	152			181		1,398			875
Litigation and operational losses	308			435		1,264			811
Merger and acquisition related	3,738			24		3,772			1,634
Other operating	5,928			6,645		19,040			17,662
Total noninterest expense	54,897			49,530		156,856			145,532
Income Before Income Taxes	33,019			31,079		97,520			98,717
Income tax provision	6,375			5,930		19,007			18,217
Net Income	$	26,644		$	25,149	$	78,513		$	80,500
Average Shares Outstanding	98,267,229			100,226,647		98,363,539			98,998,497
Average Shares Outstanding Assuming Dilution	98,547,898			100,490,812		98,615,787			99,197,568
Per Share Data:
Basic Earnings per Share	$	0.27		$	0.25	$	0.80		$	0.81
Diluted Earnings per Share	$	0.27		$	0.25	$	0.80		$	0.81
Cash Dividends Declared per Common Share	$	0.10		$	0.09	$	0.30		$	0.26

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

ITEM 1. Financial Statements and Supplementary Data (Continued)

FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Three Months Ended		For the Nine Months Ended
September 30,		September 30,
2019	2018	2019