First · NYSE:FCF

First — First Commonwealth Financial — Raymond James 2020 U.S. Bank Conference

46 slides from First's conference presentation, Sep 10, 2020

  1. Slide 1: First Commonwealth Financial (NYSE: FCF)

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  2. Slide 2: Raymond James 2020 U.S. Bank Conference

    Raymond James 2020 U.S. Bank Conference September 10, 2020 2

  3. Slide 3: Franchise Overview

    2Q 2020 Investor Relations Discussion Materials FRANCHISE OVERVIEW FCF Branches (133) Santander Branch Acquisition (14) FCF Mortgage LPO (3) FCF Commercial LPO (3) . Diversified community bank with 147 retail . Total Assets: $9.4 billion branches in Pennsylvania and Ohio . Total Gross Loans: $7.0 bi

  4. Slide 4: Investment Thesis

    2Q 2020 Investor Relations Discussion Materials INVESTMENT THESIS . Entering the downturn from a position of strength – Cohesive leadership team with an ability to execute – Diversified geography through legacy Pennsylvania operations and expansion into Ohio markets – Diversified revenue streams and

  5. Slide 5: A Culture of Continual Transformation

    2Q 2020 Investor Relations Discussion Materials A CULTURE OF CONTINUAL TRANSFORMATION New CEO New Bank New New CCO New New President New Retail Commercial Legacy core team Experienced Wealth New CFO Bank New Lending New Head augmented with new talent Leadership CIO Head Head Mortgage Consumer Head L

  6. Slide 6: Experienced Leadership Team

    2Q 2020 Investor Relations Discussion Materials EXPERIENCED LEADERSHIP TEAM Years of Experience Name Title Current With In Prior Position Role FCF Banking T. Michael Price President and CEO 8 12 32 President, First Commonwealth Bank James R. Reske EVP – CFO and Treasurer 6 6 30 CFO and Treasurer Jan

  7. Slide 7: Investments Aligned with Revenue Growth

    2Q 2020 Investor Relations Discussion Materials INVESTMENTS ALIGNED WITH REVENUE GROWTH The redeployment of back office and retail restructuring savings in 2014 and 2015 has allowed for profitable investments in revenue producing lines of businesses like Mortgage, SBA and Indirect Auto Operating Lev

  8. Slide 8: Fee Income Growth: Diversified Revenue Streams

    2Q 2020 Investor Relations Discussion Materials FEE INCOME GROWTH: DIVERSIFIED REVENUE STREAMS $ in millions 2015 2016 2017 2018 2019 2Q20 Service charges $15.3 $15.9 $18.6 $18.2 $18.9 $3.3 Interchange 14.5 15.0 18.8 20.2 21.7 5.9 Trust 5.8 5.4 7.1 7.9 8.3 2.1 Retail brokerage and insurance 8.5 8.0

  9. Slide 9: Expense Control: Operating Expense Trend

    2Q 2020 Investor Relations Discussion Materials EXPENSE CONTROL: OPERATING EXPENSE TREND(1) (1) $203.6 $185.9 $191.0 $168.8 $156.5 43% 43% 43% 42% 57% 50% 44% 57% 58% 57% 50% 56% $51.9 45% 55% . Successfully redeployed back office savings into revenue producing business lines over the past five year

  10. Slide 10: Regional Leadership Model

    2Q 2020 Investor Relations Discussion Materials REGIONAL LEADERSHIP MODEL First Commonwealth began transitioning to a regional leadership model in 2017 . Leadership and accountability lies with the regional presidents . Better connectedness between lines of business . Wealth referrals increasing . S

  11. Slide 11: A Diversified Community Bank

    2Q 2020 Investor Relations Discussion Materials A DIVERSIFIED COMMUNITY BANK Loan Portfolio Composition ($mm) Loan Portfolio Repricing ($mm) Non-Owner Occupied Interest rate floors exist CRE / Total for 32% of variable rate Capital Ratio: 189.0%(1) loans C&D Loans / Total WA Floor of 3.44% < WA Capi

  12. Slide 12: Stable Low-Cost Deposit Advantage

    2Q 2020 Investor Relations Discussion Materials STABLE LOW-COST DEPOSIT ADVANTAGE Deposit Composition ($mm)(1) Geographic Breakdown(1) 16% Business/84% Retail 67% Business/33% Retail $7.5 $7.5 billion billion 25% Business/75% Retail 46% Business/54% Retail Deposit Costs (%)(3) . 54% of the Bank’s de

  13. Slide 13: M&A Expansion Update

    2Q 2020 Investor Relations Discussion Materials M&A EXPANSION UPDATE Successful Expansion Efforts Ohio Loan Portfolio ($MM)(1) . Leveraging significant management experience in Ohio market . Opened a business center in Cleveland in April 2014 – Targeting commercial customers in northeast OH . Acquir

  14. Slide 14: Smaller Communities Fund Larger Metro Markets

    2Q 2020 Investor Relations Discussion Materials SMALLER COMMUNITIES FUND LARGER METRO MARKETS First Commonwealth’s rural geographies have proven to be a stable source of low-cost funding, which enabled our strategy of leveraging our commercial lending business in faster growing metro markets through

  15. Slide 15: COVID-19 Operational Update

    2Q 2020 Investor Relations Discussion Materials COVID-19 OPERATIONAL UPDATE The Company took early action by executing its business continuity plan to protect the health and welfare of its associates and mitigate customer disruption Employees Consumers Businesses Communities . Approximately 40% of .

  16. Slide 16: COVID-19: Reserve Build Year-to-Date

    2Q 2020 Investor Relations Discussion Materials COVID-19: RESERVE BUILD YEAR-TO-DATE Allowance for Loan Losses Released $2.9 million in 2Q due primarily to the resolution of Includes additional three reserves for commercial commercial credits overlays (slide 17) and consumer forbearances Assumes (sl

  17. Slide 17: COVID-19: Highest Impacted Commercial Portfolios

    2Q 2020 Investor Relations Discussion Materials COVID-19: HIGHEST IMPACTED COMMERCIAL PORTFOLIOS Balance Outstanding Non-pass (% port) Nonperforming (% port) Deferrals(2) $ in millions $ bal % tot lns 1Q20 2Q20 1Q20 2Q20 @ 4/24 % port @ 9/04 % port Commercial Portfolio(1) Retail $547.5 7.9% 0.7% 0.7

  18. Slide 18: COVID-19: Deferrals

    2Q 2020 Investor Relations Discussion Materials COVID-19: DEFERRALS(1) Initial deferrals were offered to all customers regardless of circumstances; additional 90 day deferrals are being assessed based on credit determination Total LoansDeferrals (@ 4/24) Deferrals (@ 9/04) $ in millions $ bal % tot

  19. Slide 19: Reduced Portfolio Risks: Size and Concentration

    2Q 2020 Investor Relations Discussion Materials REDUCED PORTFOLIO RISKS: SIZE AND CONCENTRATION . Increased granularity and decreased concentration risk – Expanding consumer, middle market and small business relationships – Geographic expansion decreases single market or location risk – Adopted a re

  20. Slide 20: Asset Quality Trends

    2Q 2020 Investor Relations Discussion Materials ASSET QUALITY TRENDS Nonperforming Assets / Assets(1) (%) Net Charge-Offs / Loans (%) Reserves / Nonperforming Loans (%) Nonperforming Loans / Loans (%) (1) Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases, and fo

  21. Slide 21: Loans by Geography

    2Q 2020 Investor Relations Discussion Materials LOANS BY GEOGRAPHY(1) . Location based on collateral location for RE secured or borrower address for C&I and other consumer loans . Loan portfolio primarily based in Pennsylvania, Ohio and contiguous states $7.0 . Commercial lending market area extends

  22. Slide 22: Strong Capital Position

    2Q 2020 Investor Relations Discussion Materials STRONG CAPITAL POSITION(1) Over $220 million of excess capital at June 30, 2020 Excess Capital Well-Capitalized Regulatory Minimum 13.9% 11.3% 11.3% 8.9% 10.0% 8.0% 6.5% 5.0% (1) Bank level regulatory capital ratios As of June 30, 2020 22

  23. Slide 23: Performance Highlights

    2Q 2020 Investor Relations Discussion Materials PERFORMANCE HIGHLIGHTS Trailing 5 Quarters 2014Y 2015Y 2016Y 2017Y 2018Y 2019Y 2Q19 3Q19 4Q19 1Q20 2Q20 Earnings growth Operating revenue(1) $248 $254 $267 $309 $334 $357 $89 $91 $92 $89 $89 Provision for credit losses 11 15 18 5 13 15 3 3 5 31 7 Opera

  24. Slide 24: Performance Relative to Peers

    2Q 2020 Investor Relations Discussion Materials PERFORMANCE RELATIVE TO PEERS Core ROAA (%)(1) Efficiency Ratio (%)(1) Core ROAE (%)(1) Net Interest Margin (%)(2) (1) Core ROAA, ROAE and Efficiency Ratios as calculated by S&P Global Market Intelligence and may not agree with management's reported fi

  25. Slide 25: Digital Strategy

    2Q 2020 Investor Relations Discussion Materials DIGITAL STRATEGY . Create a mobile-centric, full-service banking capability that stands on its own without the need for the customer to go to a branch or call the Engagement Center. . Enhance ability to proactively engage customers in virtual conversat

  26. Slide 26: Digital and Payments

    2Q 2020 Investor Relations Discussion Materials DIGITAL AND PAYMENTS • Bank when, where and on • Consumer deposit accounts whatever device you prefer • Consumer loans and lines of • Ongoing upgrades and credit enhancements to improve • Home equity loans and lines customer experience Account Ease of

  27. Slide 27: Digital and Payments Update

    2Q 2020 Investor Relations Discussion Materials DIGITAL AND PAYMENTS UPDATE . Digital account opening – Released our updated mobile centric account opening (over 10% of retail transaction account production from virtual channels) . All new or reissued debit and credit cards contactless (Tap ‘n Go) .

  28. Slide 28: New Digital Banking Experience

    2Q 2020 Investor Relations Discussion Materials NEW DIGITAL BANKING EXPERIENCE . Innovative design elements for organizing the user interface (UI) allowing users to customize their experience . A unique customer interaction platform that brings human personalization to the digital customer experienc

  29. Slide 29: How We Succeed

    2Q 2020 Investor Relations Discussion Materials HOW WE SUCCEED . Remain an authentic, mission-driven community bank – Continue to support our employees, customers and communities through these uncertain times – Proactively engage borrowers and assist them with charting a path forward – Win customers

  30. Slide 30: Earnings Detail

    2Q 2020 EARNINGS DETAIL col fonwealth 30

  31. Slide 31: Second Quarter 2020 Highlights

    2Q 2020 Investor Relations Discussion Materials SECOND QUARTER 2020 HIGHLIGHTS Building a strong balance sheet to weather uncertainty Highlights ahead $36.1 million . Additional reserve build of $2.4 million resulting in a reserve coverage ratio (excluding PPP loans) of Pre-tax Pre-provision income(

  32. Slide 32: Credit Quality

    2Q 2020 Investor Relations Discussion Materials CREDIT QUALITY . Provision expense of $6.9 million decreased Provision Expense and Net Charge-offs $24.1 million from LQ: 7.0 0% $36 .0 $31.0 − $3.4 million increase in qualitative reserves for 6.0 0% $31 .0 economic conditions 5.0 0% $26 .0 4.0 0% − $

  33. Slide 33: Net Interest Income and Net Interest Margin

    2Q 2020 Investor Relations Discussion Materials NET INTEREST INCOME AND NET INTEREST MARGIN Net Interest Income(1) . Net interest income decreased $1.1 million to LQ as the result of a 36 basis point (bps) decrease in the net interest margin, driven by the impact of the lower interest rate environme

  34. Slide 34: Loans

    2Q 2020 Investor Relations Discussion Materials LOANS Average Loans(1) Average . Average loans increased $522 million from LQ – Includes $406 million of PPP loans – Excluding PPP loans, average loans grew $116 million, or 7.4% (annualized) from the previous quarter . The yield on loans decreased 57

  35. Slide 35: Deposits

    2Q 2020 Investor Relations Discussion Materials DEPOSITS Average Deposits Average . Average deposits grew $758 million from LQ and $1.3 billion YoY ($860 million YoY excluding acquired balances from Santander(1)) . The cost of total deposits of 0.31% decreased 20 basis points from the previous quart

  36. Slide 36: Noninterest Income

    2Q 2020 Investor Relations Discussion Materials NONINTEREST INCOME Change from 2Q20 1Q20 2Q19 1Q20 2Q19 . Total fee income increased $2.5 million Service charges $3.3 $4.7 $4.6 ($1.4) ($1.3) from LQ and decreased $0.1 million YoY Interchange 5.9 5.3 5.4 0.6 0.5 Trust 2.1 2.1 2.0 0.0 0.1 . Gain on sa

  37. Slide 37: Noninterest Expense

    2Q 2020 Investor Relations Discussion Materials NONINTEREST EXPENSE Change from 2Q20 1Q20 2Q19 1Q20 2Q19 . Total operating expenses decreased $0.9 Salaries and benefits $28.8 $30.0 $27.3 ($1.2) $1.5 million from the previous quarter and Occupancy 4.4 5.0 4.4 (0.6) 0.0 increased $0.2 million YoY Furn

  38. Slide 38: Capital Return

    2Q 2020 Investor Relations Discussion Materials CAPITAL RETURN Payout Ratios . Strong capital levels allow us to continue to return capital to shareholders . Announced a $25 million share repurchase program in 1Q19 – Suspended current program on March 13, 2020 with $15.6 million remaining . Increase

  39. Slide 39: Appendix

    APPENDIX coRfonwealth 39

  40. Slide 40: Non-GAAP Measures: Operating Revenue

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Operating Revenue 2Q20 1Q20 4Q19 3Q19 2Q19 Net Interest Income $66.7 $67.7 $68.8 $68.5 $67.1 Tax equivalent adjustment 0.4 0.4 0.4 0.4 0.5 Net Interest Income (FTE) 67.1 68.1 69.2 68.9 67.6 Noninterest Income (Reported) 21.8 19.3 22.5

  41. Slide 41: Non-GAAP Measures: Core Earnings per Share

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Core Earnings per Share 2Q20 1Q20 4Q19 3Q19 2Q19 Net Income (GAAP) $23.9 $4.7 $26.8 $26.6 $27.3 Less: Merger and acquisition related (after tax) 0.0 0.0 (0.2) 3.0 0.0 Core Net Income (Non-GAAP) $23.9 $4.7 $26.6 $29.6 $27.3 Average Dil

  42. Slide 42: Non-GAAP Measures: Return on Average Tangible Common Equity

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Return on Average Tangible Common Equity (%) 2Q20 1Q20 4Q19 3Q19 2Q19 Average Equity $1,072 $1,071 $1,051 $1,034 $1,009 Less: Average intangible assets 319 319 320 293 287 Less: Average preferred stock 0 0 0 0 0 Average Tangible Commo

  43. Slide 43: Non-GAAP Measures: Tangible Common Equity Ratio

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Tangible Common Equity / Tangible Assets (Tangible Common Equity Ratio) 2Q20 1Q20 4Q19 3Q19 2Q19 Total Equity $1,076 $1,058 $1,056 $1,039 $1,022 Less: Intangible assets 318 319 320 320 287 Less: Preferred stock 0 0000 Tangible Common

  44. Slide 44: Non-GAAP Measures: Operating Revenue (Annual)

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Operating Revenue 2019Y 2018Y 2017Y 2016Y 2015Y 2014Y 2013Y Net Interest Income $269.9 $252.2 $228.8 $199.0 $188.5 $183.7 $184.7 Tax equivalent adjustment 1.7 2.0 4.2 3.9 3.4 3.3 4.0 Net Interest Income (FTE) 271.6 254.2 233.0 202.9 1

  45. Slide 45: Non-GAAP Measures: Core Return on Average Assets

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Core Return on Average Assets (%) 2019Y 2018Y 2017Y 2016Y 2015Y 2014Y 2013Y Net Income (GAAP) $105.3 $107.5 $55.2 $59.6 $50.1 $44.5 $41.5 Less: Merger and acquisition (after tax) 2.8 1.3 6.6 2.1 0.6 0.0 0.0 Less: Realized (gains) / lo

  46. Slide 46: Non-GAAP Measures: Return on Average Tangible Common Equity (Annual)

    2Q 2020 Investor Relations Discussion Materials NON-GAAP MEASURES Return on Average Tangible Common Equity (%) 2019Y 2018Y 2017Y 2016Y 2015Y 2014Y 2013Y Average Equity $1,020 $942 $855 $743 $719 $719 $728 Less: Average intangible assets 297 282 254 168 163 161 162 Less: Average preferred stock 0 000

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