First Commonwealth Financial Profile
First Commonwealth Financial Corporation (First Commonwealth) operates as a financial holding company.
The company’s operating subsidiaries include First Commonwealth Bank (‘FCB’ or the ‘bank’), First Commonwealth Insurance Agency, Inc. (‘FCIA’) and FRAMAL. The company provides a diversified array of consumer and commercial banking services through the company’s bank subsidiary, FCB. The company also provides trust and wealth management services through FCB and offer insurance products through FCIA.
FCB is a Pennsylvania bank and trust company. The bank operates various community banking offices in 30 counties throughout western and central Pennsylvania and throughout Ohio, as well as commercial lending operations in Harrisburg, Pennsylvania, and Canton, Cleveland, Columbus, Canfield and Hudson, Ohio. The bank also operates a network of automated teller machines, or ATMs, at various branch offices and offsite locations. All of the company’s ATMs are part of the NYCE and MasterCard/Cirrus networks, both of which operate nationwide.
The bank is a member of the Allpoint ATM network, which allows surcharge-free access to various ATMs. The bank is also a member of the ‘Freedom ATM Alliance,’ which affords cardholders surcharge-free access to a network of ATMs in over 50 counties in Pennsylvania, Maryland, New York, and Ohio.
In January 2023, the company acquired Centric Financial Corporation (‘Centric’) and its banking subsidiary Centric Bank, which operated branches located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, Pennsylvania; and loan production offices in Lancaster and Devon, Pennsylvania.
The company has also focused on organic growth, improving the reach of the company’s franchise and the breadth of the company’s product offering. As part of this strategy, the company has opened some de novo branches since 2005, all of which were in the greater Pittsburgh area.
In the first quarter of 2022, the company entered the equipment leasing and finance business with a division based in the suburban Philadelphia area.
Loan Portfolio
The company’s loan portfolio includes several categories of loans that are discussed in detail below.
Commercial, Financial, Agricultural and Other
Commercial, financial, agricultural and other loans represent term loans used to acquire business assets or revolving lines of credit used to finance working capital. These loans are generally secured by a first lien position on the borrower’s business assets as a secondary source of repayment. The type and amount of the collateral varies depending on the amount and terms of the loan, but generally may include accounts receivable, inventory, equipment or other assets. Loans also may be supported by personal guarantees from the principals of the commercial loan borrowers.
Commercial Real Estate
Commercial real estate loans represent term loans secured by owner-occupied and non-owner occupied properties. Commercial real estate loans are underwritten based on an evaluation of each borrower’s cash flow as the principal source of loan repayment, and are generally secured by a first lien on the property as a secondary source of repayment. Approximately 24%, by principal amount, of the company’s commercial real estate loans involve owner-occupied properties.
For loans secured by commercial real estate, at origination the company obtains current and independent appraisals from licensed or certified appraisers to assess the value of the underlying collateral.
Real Estate Construction
Real estate construction represents financing for real estate development. Development and construction loans are secured by the properties under development or construction, and personal guarantees are typically obtained as a secondary repayment source.
Construction loans to residential builders are generally made for the construction of residential homes for which a binding sales contract exists and for which the prospective buyers have been pre-qualified for permanent mortgage financing by either third-party lenders or the company. These loans are generally for a period of time sufficient to complete construction.
Residential construction loans to individuals generally provide for the payment of interest only during the construction phase. At the end of the construction phase, substantially all of the company’s loans automatically convert to permanent mortgage loans and can either be retained in the company’s loan portfolio or sold on the secondary market.
Residential Real Estate
Residential real estate loans include first lien mortgages used by the borrower to purchase or refinance a principal residence and home equity loans and lines of credit secured by residential real estate.
The residential real estate portfolio includes both conforming and non-conforming mortgage loans. Conforming mortgage loans represent loans originated in accordance with underwriting standards set forth by the government-sponsored entities, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association, which serve as the primary purchasers of loans sold in the secondary mortgage market by mortgage lenders.
Loans to Individuals
The loans to individuals category includes consumer installment loans, personal lines of credit, consumer credit cards and indirect automobile and recreational vehicle loans.
The company also makes other consumer loans, which may or may not be secured. The terms of secured consumer loans generally depend upon the nature of the underlying collateral. Unsecured consumer loans usually have a term of no longer than 36 months.
Deposits
Deposits are the company’s primary source of funds to support its revenue-generating assets. The company offers traditional deposit products to businesses and other customers with a variety of rates and terms. Deposits at the company’s bank are insured by the FDIC up to statutory limits.
At December 31, 2023, the company’s deposits consisted of non-interest bearing checking accounts, interest-bearing checking accounts, money market and savings accounts, and CDs and IRAs.
Investment Portfolio
At December 31, 2023, the company’s securities were obligations of U.S. government agencies, such as mortgage-backed securities—residential and mortgage-backed securities—commercial; obligations of U.S. government-sponsored enterprises, such as mortgage-backed securities—residential and other government-sponsored enterprises; obligations of states and political subdivisions; and corporate securities.
Supervision and Regulation
First Commonwealth is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (‘BHC Act’), and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (‘FRB’).
First Commonwealth is also under the jurisdiction of the Securities and Exchange Commission (‘SEC’) and various state securities commissions for matters relating to the offer and sale of its securities and is subject to the SEC rules and regulations relating to periodic reporting, proxy solicitation and insider trading.
FCB is a state bank chartered under the Pennsylvania Banking Code and is not a member of the FRB. As such, FCB is subject to the supervision of, and is regularly examined by, both the Federal Deposit Insurance Corporation (‘FDIC’) and the Pennsylvania Department of Banking and Securities and is required to furnish quarterly reports to both agencies. The approval of the Pennsylvania Department of Banking and Securities and FDIC is also required for FCB to establish additional branch offices or merge with or acquire another banking institution.
The company is subject to a number of federal and state consumer protection laws that extensively govern the company’s relationship with the company’s customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
The Consumer Financial Protection Bureau (‘CFPB’) has broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws. Although all institutions are subject to rules adopted by the CFPB and examination by the CFPB in conjunction with examinations by the institution’s primary federal regulator, the CFPB has primary examination and enforcement authority over institutions with assets of $10 billion or more, including FCB.
Deposits of FCB are insured up to applicable limits by the FDIC and are subject to deposit insurance assessments to maintain the Deposit Insurance Fund (‘DIF’). As of December 31, 2023, FCB was a ‘well-capitalized’ bank as defined by the Federal Deposit Insurance Act, as amended.
The U.S. Treasury Department’s Office of Foreign Assets Control (‘OFAC’) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. First Commonwealth is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.
History
First Commonwealth Financial Corporation was founded in 1934.
