Regulatory Restrictions and Capital Adequacy

12 Months Ended

Dec. 31, 2023

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Regulatory Restrictions and Capital Adequacy

The amount of funds available to the parent from its subsidiary bank is limited by restrictions imposed on all depository institutions by banking regulation that restricts and limits the payment of dividends and the ability of depository institutions to engage in transactions, including lending transactions and asset purchases, with affiliates.

First Commonwealth and First Commonwealth Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators which, if undertaken, could have a direct material effect on First Commonwealth’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Commonwealth and First Commonwealth Bank must meet specific capital guidelines that involve quantitative measures of First Commonwealth’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. First Commonwealth’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Effective January 1, 2015, First Commonwealth became subject to regulatory risk-based capital rules adopted by the federal banking agencies implementing Basel III. The capital rules require First Commonwealth to maintain the following minimum capital levels:

•a minimum Tier I capital to risk-weighted assets of at least 6.0%, plus a capital conservation buffer of 2.5%, resulting in a required minimum ratio of 8.5%

•a minimum Common Equity Tier 1 to risk weighted assets of at least 4.5%, plus the capital conservation buffer of 2.5%, resulting in a required minimum ratio of 7%.

•a minimum Total Capital to risk weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum of 10.5%

•a minimum Leverage ratio, which is Tier 1 capital to adjusted average assets, of 4.0%

The capital conservation buffer may only include capital that qualifies as Common Equity Tier 1.

The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the exclusion of accumulated other comprehensive income from regulatory capital. The Company elected to retain this treatment, which reduces the volatility of regulatory capital levels.

In 2018, First Commonwealth Bank, the Company's banking subsidiary, issued $100 million in subordinated debt, which under regulatory rules qualifies as Tier II capital. As of December 31, 2023, this subordinated debt issuance increased the total risk-based capital ratio by 94 basis points.

In March 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the pandemic. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). The Company adopted CECL effective January 1, 2020 and elected to implement the five-year transition. Regulatory capital levels without the capital benefit at December 31, 2023 for both First Commonwealth and First Commonwealth Bank would have continued to be greater than the amounts needed to be considered “well capitalized”, as the transition provided a capital benefit of approximately 11 to 12 basis points.

As of December 31, 2023 and 2022, First Commonwealth and First Commonwealth Bank met all capital adequacy requirements to which they are subject and were considered well-capitalized under the regulatory rules. To be considered well capitalized, the Company must maintain minimum Total risk-based capital, Tier I risk-based capital, Tier I leverage ratio and Common equity tier I risk-based capital as set for in the tables below:


	Actual				Minimum Capital Required			Required to be Considered Well Capitalized
	Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
	(dollars in thousands)
As of December 31, 2023
Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,314,021	13.93	%		$	990,508	10.50	%	$	943,341	10.00	%
First Commonwealth Bank	1,222,182		13.01			986,558		10.50		939,579		10.00
Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,122,814	11.90	%		$	801,840	8.50	%	$	754,673	8.00	%
First Commonwealth Bank	1,030,975		10.97			798,642		8.50		751,663		8.00
Tier I Capital to Average Assets
First Commonwealth Financial Corporation	$	1,122,814	10.04	%		$	447,542	4.00	%	$	559,427	5.00	%
First Commonwealth Bank	1,030,975		9.24			446,530		4.00		558,163		5.00
Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,052,814	11.16	%		$	660,339	7.00	%	$	613,172	6.50	%
First Commonwealth Bank	1,030,975		10.97			657,705		7.00		610,727		6.50


	Actual				Minimum Capital Required			Required to be Considered Well Capitalized
	Capital Amount		Ratio			Capital Amount		Ratio		Capital Amount		Ratio
	(dollars in thousands)
As of December 31, 2022
Total Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	1,160,053	14.36	%		$	848,288	10.50	%	$	807,893	10.00	%
First Commonwealth Bank	1,100,529		13.65			846,593		10.50		806,279		10.00
Tier I Capital to Risk Weighted Assets
First Commonwealth Financial Corporation	$	966,072	11.96	%		$	686,709	8.50	%	$	646,314	8.00	%
First Commonwealth Bank	906,548		11.24			685,337		8.50		645,023		8.00
Tier I Capital to Average Assets
First Commonwealth Financial Corporation	$	966,072	10.18	%		$	379,527	4.00	%	$	474,408	5.00	%
First Commonwealth Bank	906,548		9.58			378,578		4.00		473,223		5.00
Common Equity Tier I to Risk Weighted Assets
First Commonwealth Financial Corporation	$	896,072	11.09	%		$	565,525	7.00	%	$	525,131	6.50	%
First Commonwealth Bank	906,548		11.24			564,395		7.00		524,081		6.50

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details