FCF 10-K & 10-Q changes, risk factors and insider trading

An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on, or that management currently deems immaterialimmaterial, may also impair our business operations. This report is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the market price of our common stock could decline significantly, and you could lose all or part of your investment.

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets (such as loans and securities) and interest expense paid on interest-bearing liabilities (such as deposits and borrowed funds.funds). Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Open Market Committee. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, and (iii) the average duration of our mortgage-backed securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have a material adverse effect on our business, financial condition and results of operations. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned “Net Interest Income” and Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for further discussion related to interest rate sensitivity and our management of interest rate risk.

There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operateoperate, as well as those across the United States. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans.

We require liquidity to meet our deposit and debt obligations as they come due. Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that could reduce our access to liquidity sources include a downturn in the economy, difficult credit markets or adverse regulatory actions against us. Our access to deposits may also be affected by the liquidity needs of our depositors. In particular, a substantial majority of our liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of our assets are loans, which cannot be called or sold in the same time frame. Our access to deposits may be negatively impacted by, among other factors, higher interest rates, which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed "too big to fail" or remove deposits from the banking system entirely. As of December 31, 2024,2025, approximately 27%29% of our deposits were either uninsured or otherwise unsecuredunsecured, and we rely on these deposits for liquidity. We may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.

As a result of changes in market interest rates have increased,rates, we have experienced unrealized losses on our available for sale securities portfolio. Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available for sale securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity. Nonetheless, our access to liquidity sources could be affected by unrealized losses if: (i) securities must be sold at a loss; (ii) tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; (iii) the Federal Home Loan Bank of Pittsburgh ("FHLB") or other funding sources reduce capacity; or (iv) bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits. Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.

Our internal controls, disclosure controls and procedures, and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable, but not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures,procedures or failure to comply with regulations related to controls and procedures; or failure to comply with our corporate governance policies and procedures could have a material adverse effect on our reputation, business, financial condition and results of operations. Furthermore, notwithstanding the proliferation of technology and technology-based risk and control systems, our businesses ultimately rely on people as our greatest resource, who from time to time,time make mistakes or engage in violations of applicable policies, laws, rules or procedures that are not always caught immediately by our technological processes or by our controls and other procedures, all of which are intended to prevent and detect such errors or violations. Human errors, malfeasance and other misconduct, including the intentional misuse of client information in connection with insider trading or for other purposes, even if promptly discovered and remediated, can result in reputational damage or legal risk and have a material adverse effect on our business, financial condition and results of operations.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driventechnology-driven products and services or be successful in marketing these products and services to our customers. In addition, our implementation of certain new technologies in our business processes, such as those related to artificial intelligence and algorithms, may have unintended consequences due to their limitations or our failure to use them effectively. Cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.

ReputationReputational risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, andpublic disclosure,disclosures, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Negative public opinion could also result from adverse news or publicity that impairs the reputation of the financial services industry generally. In addition, our reputation or prospects may be significantly damaged by adverse publicity or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk is magnified by the speed and pervasiveness with which information is disseminated through those channels.

Acts of Cyber-Crime May Compromise Client and Company Information, Disrupt Access to Our Systems or Result in Loss of ClientClients or Company Assets

Even well protectedwell-protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving, including as a result of artificial intelligence, and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or those related to our customers, merchants or our third party vendors, including as a result of cyberattacks, could (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions typically involve the payment of a premium over book and market values, and,values; therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our business, financial condition and results of operations.

Provisions in our articles of incorporation and bylaws, the corporate law of the Commonwealth of Pennsylvania, and state and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock. These provisions include, among other things, advance notice requirements for proposing matters that shareholders may act on at shareholder meetings. In addition, under Pennsylvania law, we are prohibited from engaging in a business combination with any interested shareholder for a period of five years from the date the person became an interested shareholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market priceprice, or adversely affect the market price of, and the voting and other rights of the holders of, our common stock.

Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long-term sovereign credit rating on the U.S. from AAA to AA+. Most recently, in connection with successive failures by the U.S. government to reverse the trend of large annual fiscal deficits and growing interest costs, Moody's lowered its long-term issuer credit rating on the U.S. from Aaa to Aa1. A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.

The following discussion and analysis represents an overview of the financial condition and the results of operations of First Commonwealth and its subsidiaries, as of and for the years ended December 31, 2024,2025, and 2023.2024. The purpose of this discussion is to focus on information concerning our financial condition and results of operations that is not readily apparent from the Consolidated Financial Statements. In order to obtain a more thorough understanding of this discussion, you should refer to the Consolidated Financial Statements, the notes thereto and to other financial information presented in this Annual Report. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on FebruaryMarch 29,2, 20242026 for a discussion and analysis of the factors that affected periods prior to 2024.2025.

First Commonwealth provides a diversified array of consumer and commercial banking services through our bank subsidiary, FCB. We also provide trust and wealth management services through FCB and insurance products through FCIA. At December 31, 2024,2025, FCB operated 124126 community banking offices throughout Pennsylvania and Ohio, as well as loanBusiness production officesCenters in Harrisburg,Canfield, Pennsylvania,Canton, Hudson, Independence and Cleveland,Lewis Columbus,Center, Canton, CanfieldOhio and Hudson,Pittsburgh Ohio.and Berwyn, Pennsylvania.

Our consumer services include internet, mobile and telephone banking, an automated teller machine network, personal checking accounts, interest-earning checking accounts, savings accounts, health savings accounts, insured money market accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft checking protection and IRA accounts. Commercial banking services include commercial lending and leasing, small and high-volume business checking accounts, on-line account management services, ACH origination, payroll direct deposit, commercial cash management services and repurchase agreements. We also provide a variety of trust and asset management services and a full complement of auto, home and business insurance as well as term life insurance. We offer annuities, mutual funds and stock and bond brokerage services through an arrangement with a broker-dealer and insurance brokers. Most of our commercial customers are small and mid-sized businesses in Pennsylvania and Ohio.

As a financial institution with a focus on traditional banking activities, we earn the majority of our revenue through net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing our net interest margin, which is net interest income (on a fully taxable-equivalent basis) as a percentage of our average interest-earning assets. We also generate revenue through fees earned on various services and products that we offer to our customers and, less frequently,and through sales of assets, such as loans, investments or properties. These revenue sources are offset by provisions for credit losses on loans, operating expenses and income taxes.

•The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default and loss given default measures the expected loss upon default. Inputs impacting the expected losses includesinclude a forecast of macroeconomic factors, using a weighted forecast from a nationally recognized firm.

As noted above, the allowance for credit losses is estimated using a number of inputs and assumptions. Management's sensitivity analysis of the allowance identified that the model has the highest degree of sensitivity around values used in the economic forecast, specifically national unemployment andunemployment, gross domestic product.product and business bankruptcies. Additionally, there is also a high degree of sensitivity related to estimated prepayment speedsspeeds, as it is a major driver for the life of loan expectations. The sensitivity of estimated prepayment speeds had the largest impact on the residential first lien loan pool.

Net income for 20242025 was $142.6$152.3 million, or $1.39$1.47 per diluted share, as compared to net income of $157.1$142.6 million, or $1.54$1.39 per diluted share in 2023.2024. Contributing to the decreaseincrease in net income was a $6.8$47.2 million declineincrease in net interest incomeincome, andoffset by a $14.4$7.6 million increase in provision for credit losses. Provision for credit losses in 20232025 included $10.7$3.8 million related to the day 1 adjustment on non-PCD loans acquired in the CentricCenter acquisition. NoninterestAdditionally, the increase in net interest income was offset by a $24.1 million increase in noninterest expense increased $0.8 million in 20242025 compared to 2023,2024, howeverwith 2023 included $8.9$4.0 million inof expensesthe related2025 increase attributable to the CentricCenter acquisition. Noninterest income increaseddecreased $2.6$2.4 million in 20242025 compared to 20232024 despiteresulting from a decline of $6.8$6.3 million in card-related interchange income as a result of the Company being subject to the Durbin Amendment to the Dodd-Frank Act beginningfor Julythe 1,full year of 2025 compared to six-months in 2024.

Average diluted shares for the year 20242025 were 0.4%1.3% more than the comparable period in 20232024 primarily due to $12.7$45.9 million in common shares issued in relation to the Center acquisition offset by $36.5 million of common stock buybacks completed during 2024.2025.

Net interest income, on a fully taxable equivalent basis, was $380.2$427.5 million for the year-ended December 31, 2024,2025, a $6.7$47.2 million, or 2%,12%, decreaseincrease compared to $386.9$380.2 million for the same period in 2023.2024. The net interest margin, on a fully taxable equivalent basis, decreasedincreased 2629 basis points to 3.84% in 2025 from 3.55% in 2024 from 3.81% in 2023.2024. Net interest income and the net interest margin are affected by both changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The growthGrowth in interest-earning assets as well as higher reinvestment rates for the higherinvestment interestand rateloan environmentportfolios had a positive impact on interest income for the year ended December 31, 2024.2025. Average earning assets for the year ended December 31, 20242025 increased $0.6$0.4 billion, or 6%,4%, compared to the year ended December 31, 20232024 and interest income increased $70.5$32.3 million, or 13.3%.5.4%. The primary interest earning asset attributable to the Center acquisition was their loan portfolio, which averaged $195.9 million for the year ended December 31, 2025. Interest-sensitive assets totaling $5.1$5.7 billion will either reprice or mature over the next twelve months.

The taxable equivalent yield on interest-earning assets was 5.62%5.70% for the year ended December 31, 2024,2025, an increase of 398 basis points from the 5.23%5.62% yield for the same period in 2023.2024. ThisThe changeyield ison interest-earning assets benefited from higher reinvestment rates related to the resultinvestment ofand aloan higherportfolios. marketThe interesttax-equivalent rate ratesyield for the majorityinvestment ofportfolio 2024increased by 32 basis points and resultedthe loan and lease portfolio increased by 4 basis points when compared to the year ended December 31, 2025. The increase in the loan and leaseslease portfolio yield increasingis by 38 basis points. Contributing to this increase wereprimarily the yieldsresult of higher reinvestment rates on our fixed loans, including our fixed rate commercial loan portfolio, indirect automobile loan portfolio and adjustabledirect andconsumer variable rate commercialinstallment loan portfolios,portfolio, which increased by 7837 basis points, 35 basis points and 1329 basis points, respectively. Additionally, for the year ended December 31, 20242025, seven basis points of the yield on interest-earning assets can be attributed to the recognition of $7.5$7.4 million in accretion of purchase accounting marks, primarily from the Centric acquisition.and Center acquisitions. For the year ended December 31, 2023,2024, $9.1$7.5 million in accretion of purchase accounting marks benefited the yield on interest-earning assets by nineseven basis points.

As of December 31, 2024,2025, 51%49% of our loan portfolio had variable or adjustable interest rates and 49%51% had fixed interest rates. After incorporating the impact of our cash flow hedges that convert the interest rate on $425.0$175.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 46%47% of our loan portfolio. Loans with variable or adjustable interest rates include approximately 27%26% tied to the prime interest rate, 50%51% tied to SOFR, 11%12% tied to Treasury rates,rates 10%and 9% tied to Federal Home Loan Bank rates.

Also contributing to the increase in yield on interest-earning assets was the yield on the investment portfolio, which increased by 9032 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance increased $276.0$60.4 million as growth in average deposits exceeded the funding needs for loan growth. The yield on interest-bearing deposits with banks increaseddecreased 1379 basis points compared to the prior year as a result of higherlower interest rates, while the average balance decreased $11.8$108.2 million.

Increases in the cost of interest-bearing liabilities offset the positive impact of higher yields on interest-earning assets. The cost of interest-bearing liabilities wasdecreased 2.83%to 2.55% for the year ended December 31, 2024,2025, compared to 2.03%2.83% for the same period in 2023.2024. The increasedecrease of 9220 basis points in the cost of interest-bearing deposits can be attributed to declines in market interest rates, which influenced the mix of deposits aswith customersgrowth movedin funds into higher costing deposits to take advantage of the increased rates offered onboth money market accounts and time deposits. Average time deposits increased $577.3$213.3 million, or 59.3%,13.8%, with an increase inwhile the cost of these deposits ofdecreased 10452 basis points. Contributing to the average growth in time deposits was an average of $60.6 million acquired as part of the Center acquisition. Other interest-bearing deposits increased an average of $128.4$336.2 million, or 2.3%,6.0%, increasingwhile the cost of deposits 74decreased 14 basis points. Average growth in other-interest bearing deposits attributable to the Center acquisition totaled $98.1 million.

The cost of short-term borrowings decreased 3593 basis points in comparison to the same period in the prior year. Average short-term borrowings increaseddecreased by $4.9$349.1 million for the year ended December 31, 20242025 compared to the same period in 2023.2024 primarily due to the payoff of $516.0 million in short-term borrowings related to the Federal Reserve Term Funding program in the fourth quarter of 2024. Average long-term debt decreasedincreased $0.1$75.8 million,million as a result of a $127.0 million FHLB borrowing entered into in the fourth quarter of 2024, while the cost of long-term debt decreased by 444 basis points.

Comparing the year ended December 31, 20242025 with the same period in 2023,2024, changes in rates negativelypositively impacted net interest income by $8.2$28.9 million. The higher yield on interest-earning assets increased net interest income by $47.8$8.5 million, while the change in the cost of interest-bearing liabilities negativelypositively impacted net interest income by $56.0$20.4 million.

Net interest income was negativelypositively impacted by a decrease of $147.3$136.8 million in average net free funds at December 31, 20242025 as compared to December 31, 2023.2024. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The lowerhigher level of net free funds was primarily the result of lowergrowth in noninterest-bearing demand deposits as customerswell becameas morehigher rateaverage sensitive.shareholders' equity due to retained earnings and stock issued for the Center acquisition.

(ed)Includes held for sale loans.

The provision for credit losses is determined based on management’s estimates of the appropriate level of the allowance for credit losses needed to provide for expected losses inherent in the loan and lease portfolio and on off-balance sheet commitments. The provision for credit losses is an amount added to the allowance against which credit losses are charged.

The provision for credit losses in 20242025 totaled $29.2$36.7 million, reflecting an increase of $14.4$7.6 million compared to the $14.8$29.2 million provision recognized in 2023.2024. Included in the provision expense for 20232025 was $10.7$3.4 million in day 1 non-PCD expense and $0.3 million in expense related to off-balance sheet commitments related to the CentricCenter acquisition. Provision expense related to outstanding loans and leases, excluding the impact of the day 1 non-PCD expense in 2023,2025, increased $25.3$3.1 million in 2024. This increase can be primarily attributed to $31.2 million in net charge-offs and a $3.1 million increase in specific reserves.2025. The provision for off-balance sheet commitments decreasedincreased $0.3$7.2 million in 20242025 compared to 20232024 as a result of lowerhigher off-balance sheet commitments related to commercial and residential construction loans.loan commitments, as well as the impact of periodic updates, completed in the third quarter of 2025, related to the expected loss rates for these loan categories.

The level of provision expense in 20242025 was primarily related to two loan categories including: the commercial, financial, agricultural and other category as well asand commercial real estate. These two categories accounted for $27.5$26.4 million of the $32.4$32.7 million total provision expense for loans and leases. Provision expense for the commercial, financial, agricultural and other category was $15.8$21.9 million in 20242025 and wasincluded impacted by an increase of $11.5$8.5 million infor provisiona expensedealer relatedfloor toplan timerelationship andthat demand loans and an increase of $3.4 million in provision expense related to the equipment finance portfolio. The increase in the provision expense related to the time and demand category can be attributed to $10.7 million in net charges-offs as well as an increase of $0.7 million in specific reserves primarily due to new loanswas moved to nonaccrualnoanccrual during 2024. The increase in the provisionsecond expensequarter of 2025 as a result of being out of trust on sold vehicles. Also impacting this category was $8.0 million recognized related to the equipment finance portfolio canas bea attributedresult toof $265.9 million, or 62%, loan growth in thethat portfolio of $194.4 million, or 83%, and $1.8 million in net charge-offs.category. Provision expense for the commercial real estate category was impactedprimarily bya $8.5result of $4.7 million infor netthe charge-offsnon-owner andoccupied anreal increaseestate portfolio. Included in generalprovision reservesexpense duefor the non-owner occupied portfolio was a $1.7 million specific reserve for a loan that was moved to $71.6 millionnonaccrual in loanthe growth.fourth quarter of 2025. Additionally, the $1.4 million negative provision for the residential real estate category can be attributed to a $75.2slight increase of $18.6 million decrease in outstanding loan balances.balances Netoffset charge-offsby relatedthe toimpact of lower loss rates. The level of provision expense for loans to individuals wereis $6.8related to net charge-offs in that category, which totaled $5.5 million for the year ended December 31, 2024,2025, including $5.2$4.0 million for indirect auto loans and $1.2 million related to other consumer loans.

The allowance for credit losses was $118.9$125.8 million, or 1.32%, of total loans and leases outstanding at December 31, 2024,2025, compared to $117.7$118.9 million, or 1.31%,1.32%, at December 31, 2023.2024. Nonperforming loans as a percentage of total loans increased to 0.97% at December 31, 2025 from 0.68% at December 31, 2024 from 0.44% at December 31, 2023.2024. The allowance to nonperforming loan ratio was 193.5%137.1% as of December 31, 20242025 and 298.2%193.5% at December 31, 2023.2024. Net charge-offs were $31.2$29.4 million for the year ended December 31, 20242025 compared to $30.2$31.2 million for the same period in 2023,2024, ana increasedecrease of $1.0$1.8 million. During 2024,2025, $11.1$7.6 million in charge-offs were recognized relatedas toa loansresult acquired throughof the Centricpreviously acquisition;mentioned $2.4dealer floor plan loan and $5.6 million of thesein charge-offs were specificallyrecorded providedwhen certain commercial loans were moved to held for assale part ofduring the PCD allowance for credit losses at acquisition.year.

NoninterestTotal income,noninterest income (excluding net securities (losses) gains,losses, gain on VISA exchange, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market,market), decreased $1.9$2.2 million, or 2%,3%, in 2024.2025. This decrease can be attributed to a $6.8$6.3 million decline in card-related interchange income resulting from the Company being subject to the Durbin Amendment to the Dodd-Frank Act beginning July 1, 2024. The Durbin Amendment is now applicable to the Company because its total assets exceeded $10.0 billion as of December 31, 2023. TheAs Companya willresult, beits subject to the Durbin Amendment for the full yearcurtailment of 2025 and it is expected to decrease our 2025card-related interchange income bywent aninto additionaleffect $6.0on millionJuly compared1, to the 2024 level.2024.

IncomeInsurance fromand bankretail ownedbrokerage life insurancecommissions increased $1.5by $1.1 million, ofor which $1.0 million was related to an increase10%, in policy death benefits. Service charges on deposit accounts increased $1.1 million2025, primarily due to higher businessannuity accountsales, analysis income and increased customer activity.while Trust income increased $1.3$1.1 millionmillion, or 9%, due to gainsrevenue in the value offor assets under management. Swap fee income declinedincreased $0.6$0.7 millionmillion, compared to the prior period, as a result of a decreasegrowth in new interest rate swaps entered into by our commercial loan customers compared to the prior period.customers.

Total noninterest income increaseddecreased $2.6$2.4 million, or 3%,2%, in comparison to the year ended December 31, 2023. The most significant changes, other than the changes noted above, include a $5.7 million gain related to the conversion and sale of Visa class B shares.2024. Gain on sale of mortgages increased $1.8$1.5 million as a result of changes in volume and spread received on mortgage loans sold, and gain on sale of other loans and assets increaseddecreased $2.4$2.2 million dueas toa anresult increaseof a decline in the volume and spread on the sale of SBA loans. Offsetting these gains are $5.4 million in losses recognized on the sale of $75.1 million in available for sale securities, which were sold in order to reinvest into higher yielding investments.

The provision for income taxes of $35.6$39.1 million in 20242025 reflects aan decreaseincrease of $4.9$3.4 million compared to the provision for income taxes in 20232024 as a result of a $19.3$13.2 million decreaseincrease in the level of income before taxes.

The effective tax rate was 20.0%20.4% and 20.5%20.0% for tax expense in 20242025 and 2023,2024, respectively. We ordinarily generate an annual effective tax rate that is less than the statutory rate due to benefits resulting from tax-exempt interest, income from bank owned life insurance, and tax benefits associated with low incomelow-income housing tax credits, all of which are relatively consistent regardless of the level of pretax income.

First Commonwealth’s total assets increased $0.1$758.1 billionmillion as of December 31, 20242025 compared to December 31, 2023.2024. Loans and leases, including loans held for sale, increased $37.2$743.7 million. LoanContributing growth,to excludingthe loan growth in 2025, including loans held for sale, inwere 2024increases totaledof $15.0$265.9 million within equipment finance loans, $231.3 million in commercial real estate loans accountingand for$107.0 amillion majorityin ofautomobile theand growth.recreational vehicle loans. Investment securities increaseddecreased $113.3$19.6 million, or 8%1%, and cash and interest-bearing balances with banks decreasedincreased $13.6$47.0 million, or 9%.35%.

First Commonwealth’s total liabilities increased $34.6$608.9 million in 2024.2025. Deposits increased $485.7$573.0 million and long-term borrowings increaseddecreased $126.2$0.8 million. Short-term borrowings decreasedincreased $517.7$67.8 million, or 87%. Subordinated debentures decreased $49.4 million due to the early redemption of a $50.0 million issuance.85%.

Total shareholders' equity increased $90.9$149.2 million in 2024.2025. The growth in shareholders' equity was the result of net income of $142.6$152.3 million, common stock issued for the Center acquisition of $45.9 million and a $9.2$37.9 million increase in accumulated other comprehensive income,income resulting from changes in the fair value of available for sale investments, offset by $52.6$55.5 million in dividends declared and $12.7$36.5 million in stock repurchases.

The loan and lease portfolioportfolio, excluding loans held for sale, totaled $9.0$9.5 billion as of December 31, 2024,2025, reflecting growth of $15.0$524.3 million compared to December 31, 2023.2024. The Center acquisition contributed $292.6 million of this loan growth while the movement of a portfolio of loans to held for sale in the fourth quarter of 2025 negatively impacted the growth by $225.4 million. Commercial, financial, agricultural and other loans increased $134.6$367.0 million, or 9%,22%, $194.4$265.9 million of which is a result of growth in the equipment finance portfolio whileand $92.5 million of which was the result of growth in time and demand loans decreased by $53.7 million.loans. Residential real estate loans decreasedincreased $75.2$18.6 million, or 3%,1%, as $82.9 million growth from the Center acquisition was offset by runoff in the portfolio due to a higher percentage of new loans being originated for sale. Commercial real estate loans increased $71.6$57.4 million, or 2%, primarily due to growth in multifamilyowner- and non-owner occupied properties. Growth in commercial real estate loans was impacted by the addition of $114.6 million acquired as part of the Center acquisition, offset by $173.9 million of loans moved to held for sale in the fourth quarter of 2025. Loans to individuals decreasedincreased $1.7$101.9 million primarily due to a decline in other consumer loans, offset by growth in indirect auto and recreational vehicle loans.

The level of the loan portfolio in 20232025 was impacted by the CentricCenter acquisition.acquisition as well as the movement of a select portfolio of loans to held for sale. To better understand the changes to loan portfolio in 2023,2025, the following table shows a breakdown of our loan portfolio between loans originated and loans acquired through the CentricCenter acquisition and the portfolio moved to held for sale as of December 31, 20232025:

(1) Includes JanuaryApril 31,30, 20232025 balance of loans acquired as part of the CentricCenter acquisition plus day 1 gross up of PCD loans.

The office portfolio comprises 17.1%14.8% of total commercial real estate loans and 37.1%25.0% of total commercial real estate non-pass loans. The average loan commitment size for the office portfolio is $1.6$0.9 million and the average outstanding balance as of December 31, 20242025 is $1.1$0.9 million. Within the office portfolio, exposures over $1.0 million have an average debt service coverage ratio of 1.46x,1.54x, which exceeds our internal guidelines of 1.35x1.25x to 1.40x,1.50x, depending on property class. AdditionallyAdditionally, for loans with exposure over $1.0 million, the office portfolio has ana weighted average loan to value of 61.0%54% compared to internal guidelines of 60-75% depending on property class. Our current measure is based off of the most recent appraisal on file, the majority of which are from origination.

As previously noted, portfolioPortfolio segment limits are approved by our Board of Directors' Risk Committee. These segment limits incorporate loan commitments and are based off of total Tier 1 capital plus the allowable allowance for credit losses. In the second quarter of 2024, after considering the current environment and potential risks related to the office portfolio, the segment limit for the office portfolio was decreased from 65% to 50%, with the actual segment concentration at 40%32.4% as of December 31, 2024.2025.

Nonperforming loans increased $22.0$30.3 million to $91.8 million at December 31, 2025, compared to $61.5 million at December 31, 2024,2024. comparedDuring 2025, $94.1 million in loans were moved to $39.5nonaccrual, offset by $30.3 million in paydowns and payoffs, $5.8 million in sales, and $27.0 million in charge-offs. During 2025, two dealer floor plan relationships with balances of $13.8 million at December 31, 2023.2025 were placed in nonaccrual status. The increaserelationships totaled $41.4 million when placed in nonperformingnonaccrual and subsequently the balances were reduced by $20.0 million in payments from the liquidation and sale of collateral and by $7.6 million in chargeoffs. In addition, $8.5 million in the new nonaccrual loans iswere primarily athe result of $62.9 million in loans being moved to nonaccrual status, offset by the saleCenter of $20.1 million in nonperforming loans as well as the charge off of $14.2 million in seven commercial nonperforming loans.acquisition. Nonperforming loans as a percentage of total loans increased to 0.68%0.97% from 0.44%0.68% at December 31, 20242025 compared to December 31, 2023,2024, respectively.

Provision for credit losses on loans and leases as a percentage of net charge-offs increaseddecreased to 99.7% for the year ended December 31, 2025 from 103.8% for the year ended December 31, 2024 from 23.6% for the year ended December 31, 2023.2024. This change was primarily driven by the $31.2$29.4 million in net charge-offs.

The allowance for credit losses increased $1.2$6.9 million from December 31, 20232024 to December 31, 2024.2025. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.32% andat 1.31% atboth December 31, 20242025 and 2023,2024, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans. Comparing December 31, 20242025 to December 31, 2023,2024, the general reserve for performing loans is 1.24%1.22% and 1.26%,1.24%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increaseddecreased from 11.5% of nonperforming loans at December 31, 2023 to 13.0% of nonperforming loans at December 31, 2024.2024 to 10.7% of nonperforming loans at December 31, 2025. The allowance for credit losses as a percentage of nonperforming loans was 193.5%137.1% and 298.2%193.5% at December 31, 20242025 and 2023,2024, respectively.

The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time. This estimate includes losses associated with specifically identified loans, as well as estimated credit losses inherent in the remainder of the loan portfolio. Additions are made to the allowance through both periodic provisions charged to income and recoveries of losses previously incurred. Reductions to the allowance occur as loans are charged off. Management evaluates the appropriateness of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to, assessment of historical loss experience, contractual payment schedules, prepayment estimates, calculated probability of default and loss given default estimates and forecasts of certain macroeconomic variables, such as unemployment, gross domestic product, housing price indexindex, business bankruptcies as well as other macroeconomic variables. This evaluation is subjective and requires material estimates that may change over time. For a description of the methodology used to calculate the allowance for credit losses, please refer to “Critical Accounting Policies and Significant Accounting Estimates—Allowance for Credit Losses.”

The securities available for sale portfolio increaseddecreased $126.6$133.4 million, or 12%, as of December 31, 20242025 compared to December 31, 2023,2024, as deposit growth provided additional liquidity andwhich investmentexceeded securitiesfunding provided an opportunity to take advantageneeds of the currentloan interest rate environment.portfolio. Most of the growthrun off in this portfolio wasis inrelated to the Mortgage-Backedsales, Securitiespaydown -and Commercialmaturity categoryof asmortgage-backed thesesecurities. These securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits.

The available for sale investment portfolio amortized cost increaseddecreased $129.3$171.5 million, or 11%,14%, at December 31, 20242025 compared to 2023.2024. Purchases of available for sale investments totaled $437.3$162.1 million during 20242025 and calls or maturities totaled $302.5$282.7 million. The level of purchases were impacted by liquidity available from increased deposits. Liquidity provided from sales, calls and maturities was utilized to fund growth in the loan portfolio or reinvested into investment securities and interest-bearing deposits with banks.

The held to maturity investment portfolio decreasedincreased $13.4$113.8 million, or 3%,28%, at December 31, 20242025 compared to 2023.2024. Held to maturity investment purchases of $55.3$192.5 million were offset by the calls or maturities of $68.0$78.3 million in investments.

Total deposits increased $485.7$573.0 million in 2024.2025. Interest-bearing demand and savings deposits increased $162.0$359.3 million, noninterest-bearing demand deposits decreasedincreased $138.9$123.2 million and time deposits increased $462.6$90.5 million. The growth and changes in the mix of deposits isin a2025 resultwas impacted by $278.0 million in deposits acquired as part of customersthe movingCenter funds into higher costing deposits as interest rates increased.acquisition.

The estimated total amount of uninsured deposits was $2.6$2.9 billion and $2.5$2.6 billion at December 31, 20242025 and 2023,2024, respectively, of which $0.8 billion and $0.7 billion were secured by pledged investment securities or letters of credit at December 31, 20242025 and 2023.2024, respectively. Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC.

Short-term borrowings decreasedincreased $517.7$67.8 million, or 87%,85%, from $597.8 million at December 31, 2023 to $80.1 million at December 31, 2024.2024 Long-termto debt increased $76.2 million, from $186.8$148.0 million at December 31, 20232025. toLong-term debt decreased $1.2 million, from $263.0 million at December 31, 2024.2024 to $261.7 million at December 31, 2025. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 15 “Short-term Borrowings,” Note 16 “Subordinated Debentures” and Note 17 “Other Long-term Debt” of the Consolidated Financial Statements.

We generate funds to meet our cash flow needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer. The level of deposits during any period is sometimes influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds. Deposits increased $485.7$573.0 million during 2024,2025, and comprised 95% and 91% of total liabilities at both December 31, 20242025 and 2023, respectively.2024. Proceeds from the sale, maturity and redemption of investment securities totaled $370.5$429.4 million during 20242025 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.

This discussion and the related financial data are presented to assist in the understanding and evaluation of the consolidated financial condition and the results of operations of First Commonwealth Financial Corporation including its subsidiaries (“First Commonwealth”) for the three and six months ended MarchJune 31,30, 2026 and 2025, and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in this Form 10-Q.

We believe the presentation of net interest income on a fully taxable equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income per the unaudited Consolidated Statements of Income is reconciled to net interest income adjusted to a fully taxable equivalent basis on pages 5764 and 72 for the six and three months ended MarchJune 31,30, 2026 and 2025.2025, respectively.

ThreeSix Months Ended MarchJune 31,30, 2026 Compared to ThreeSix Months Ended MarchJune 31,30, 2025

For the threesix months ended MarchJune 31,30, 2026, First Commonwealth had net income of $37.5$82.1 million, or $0.37$0.81 diluted earnings per share, compared to net income of $32.7$66.1 million, or $0.32$0.64 diluted earnings per share, in the threesix months ended MarchJune 31,30, 2025. The increase in net income was primarily the result of a $13.5$19.7 million increase in net interest income and $2.1$4.3 million increase in noninterest income, offset by a $5.0$1.3 million increase in the provision for credit losses and a $4.3$2.3 million increase in noninterest expense.

For the threesix months ended MarchJune 31,30, 2026, the Company’s return on average equity was 9.75%10.60% and its return on average assets was 1.25%,1.36%, compared to 9.28%9.12% and 1.14%,1.12%, respectively, for the threesix months ended MarchJune 31,30, 2025.

Net interest income, on a fully taxable equivalent basis, was $109.3$222.2 million in the first threesix months of 2026, compared to $95.9$202.4 million for the same period in 2025. The increase in net interest income can be attributed to a 2928 basis point decrease in the cost of interest-bearing liabilities and ana 82 basis point increase in the yield on interest-earning assets with a $337.3 million increase in net interest earning assets. Net interest income comprises the majority of our operating revenue (net interest income before provision expense plus noninterest income), at 81.6%81.1% and 80.9%81.0% for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

The net interest margin on a fully taxable equivalent basis was 3.92%3.97% for the threesix months ended MarchJune 31,30, 2026 and 3.62%3.73% for the threesix months ended MarchJune 31,30, 2025. The net interest margin is affected by changes in the level of interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities.

The taxable equivalent yield on interest-earning assets was 5.65%5.67% for the threesix months ended MarchJune 31,30, 2026, an increase of eighttwo basis points compared to the 5.57%5.65% yield for the same period in 2025. The yield on interest-earning assets benefited as the yield on adjustable and fixed rate commercial loans increased 1833 basis points and 55 basis points, respectively.points. Additionally, the yield on fixed rate consumer loans increased by 3315 basis points. Offsetting these increases were a 73 basis point decrease in consumer lines of credit and a 4 basis point decline in the yield on equipment finance loans. For the threesix months ended MarchJune 31,30, 2026, fourfive basis points of the yield on interest-earning assets can be attributed to the recognition of $1.3$2.7 million in accretion of purchase accounting marks. For the threesix months ended MarchJune 31,30, 2025, accretion of purchase accounting marks contributed $1.2$3.9 million, or fiveseven basis points, to the yield on interest-earning assets.

The investment portfolio yield decreased 3two basis points in comparison to the prior year primarily due to a decline in market rates. Additionally, the average balance of investments decreased $70.3$39.7 million as compared to the threesix months ended MarchJune 31,30, 2025. Lower interest rates in the threesix months ended MarchJune 31,30, 2026 compared to the prior year resulted in a 8893 basis point decrease in the yield on interest-bearing deposits with banks, while the average balance increased from $76.8$68.2 million in 2025 to $207.8$182.9 million in 2026.

The cost of interest-bearing liabilities decreased to 2.38%2.35% for the threesix months ended MarchJune 31,30, 2026, from 2.67%2.63% for the same period in 2025. The cost of interest-bearing deposits decreased 2725 basis points and short-term borrowings decreased 72164 basis points in comparison to the same period last year. The cost of interest-bearing deposits was impacted by declines in market interest rates asoffset well asby changes in the mix of deposits due towith growth in money market and time deposits. Comparing the threesix months ended MarchJune 31,30, 2026 with the comparable period in 2025, average time deposits increased $56.9$39.0 million, or 3.2%,2.2%, with a decrease inwhile the cost of these deposits ofdecreased 5245 basis points. Contributing to the average growth in time deposits was an average of $90.3 million in balances acquired in the second quarter of 2025 as part of the Center acquisitionacquisition. inThe impact of the secondCenter quarteracquisition on average time deposit balances was an increase of 2025.$60.0 million when comparing the six-months ended June 30, 2026 to the prior year. Other interest-bearing deposits increased on average $375.3$298.8 million, or 6.5%,5.1%, compared to the threesix months ended MarchJune 31,30, 2025 and the cost of these deposits decreased 18 basis points. AverageContributing to the average growth in other-interestother bearinginterest-bearing deposits attributablewas to$146.2 million in balances acquired from Center in the second quarter of 2025. The impact of the Center acquisition totaledon $146.2average million.other interest-bearing deposits was an increase of $96.9 million when comparing the six-months ended June 30, 2026 to the prior year. Compared to the prior period, short-term borrowings decreased an average of $19.0$69.6 million and long-term debt decreased an average of $54.4$93.1 million comparedprimarily due to the prior period as a result of the payoff of $129.4 million FHLB debt during the first quarter of 2026.

For the threesix months ended MarchJune 31,30, 2026, changes in rates positively impacted net interest income by $7.4$10.9 million when compared to the same period in 2025. The yield on interest-earning assets positively impacted net interest income by $1.9$0.7 million and the decrease in the cost of interest-bearing liabilities positively impacted net interest income by $5.5$10.2 million.

Changes in the volume of interest-earning assets and interest-bearing liabilities positively impacted net interest income by $6.0$8.8 million for the threesix months ended MarchJune 31,30, 2026, as compared to the same period in 2025. Higher levels of interest-earning assets resulted in an increase of $8.2$9.8 million in interest income, while changes in the volume and mix of interest-bearing liabilities increased interest expense by $2.1$1.0 million. Average interest-earning assets for the threesix months ended MarchJune 31,30, 2026 increased $558.1$337.3 million, or 5.2%,3.1%, compared to the same period in 2025. Average loans for the comparable period increased $497.4$262.3 million, or 5.5%,2.8%, and average investments decreased $70.3$39.7 million, or 4.4%.2.4%. AverageThe loansCenter attributableacquisition, toin the Centersecond acquisitionquarter forof 2025, increased ending loan balances by $292.6 million. Assuming no change in balances, this resulted in an increase in average balances of $194.0 million when comparing the threesix months ended MarchJune 31,30, 2026 totaledwith $292.6the million.prior year.

Net interest income was positively impacted by a $199.3$162.2 million increase in average net free funds for the threesix months ended MarchJune 31,30, 2026 as compared to the corresponding period in 2025. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets. The level of net free funds was impacted by growth in average noninterest-bearing demand deposits, as well as higher average shareholders' equity due to retained earnings and stock issued for the Center acquisition. Average noninterest-bearing demand deposits for the threesix months ended MarchJune 31,30, 2026 increased $86.4$67.9 million, or 3.8%,3.0%, compared to the same period in 2025, while interest-bearing demand deposits increased $375.3 million, or 6.5%.2025.

The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the threesix months ended MarchJune 3130:

The following is an analysis of the average balance sheet and net interest income on a fully taxable equivalent basis for the threesix months ended MarchJune 3130:

(a)Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate for the threesix months ended MarchJune 31,30, 2026 and 2025.

The following table shows the effect of changes in volumes and rates on interest income and interest expense for the threesix months ended MarchJune 31,30, 2026 compared with MarchJune 31,30, 2025:

The table below provides a breakout of the provision for credit losses by loan category for the threesix months ended MarchJune 3130:

Total provision expense for the threesix months ended MarchJune 31,30, 2026, increased $5.0$1.3 million compared to the threesix months ended MarchJune 31,30, 2025. Included in the provision for credit losses for the threesix months ended MarchJune 31,30, 2026 is $7.4$4.9 million in reserves related to two individually analyzed time and demand loansrelationships and $2.2$2.1 million in reserves for one individually analyzed multifamily real estate loan, all of which were moved to nonaccrual during the first quartersix months of 2026. Provision expense for the period was also impacted by $0.7growth in the equipment finance portfolio and a $3.4 million recognizedprovision asrelated to a time and demand loan which was moved to nonaccrual in 2026 and subsequently charged-off. In addition, provision expense was impacted by charge-offs totaling $0.8 million for twothree commercial loan relationships moved to held for sale.

Also impacting provision expense in the threesix months ended MarchJune 31,30, 2026 was $0.8$1.6 million in negative provision expense related to the reserve for off-balance sheet credit exposures. The level of provision for off-balance sheet exposure in 2026 is primarily due to decreased commercial and residential construction commitments.

The provision expense for the threesix months ended MarchJune 31,30, 2025 iswas primarilyimpacted attributedby to$3.4 million recognized in the second quarter of 2025 as the day-1 non-PCD provision expense resulting from the Center acquisition. Additionally, provision expense in 2025 was impacted by growth in equipment finance and automobile and recreational vehicles loans as well as an increase in the provision for off-balance sheet commitments due to a higher balanceslevel of commercial construction loan commitments.

The allowance for credit losses was $129.2$127.4 million, or 1.37%,1.35%, of total loans and leases outstanding at MarchJune 31,30, 2026, compared to $125.8 million, or 1.32%, at December 31, 2025 and $119.9$133.0 million, or 1.32%,1.39%, at MarchJune 31,30, 2025. Nonperforming loans as a percentage of total loans and leases increaseddecreased to 0.98%0.86% at MarchJune 31,30, 2026 from 0.65%1.04% as of MarchJune 31,30, 2025 and 0.97% at December 31, 2025. The allowance to nonperforming loan ratio was 141.70%,156.08%, 137.07% and 201.89%133.62% as of MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025, respectively.

Below is an analysis of the consolidated allowance for credit losses for the threesix months ended MarchJune 31,30, 2026 and 2025 and the year-ended December 31, 2025:

The following table presents the components of noninterest income for the threesix months ended MarchJune 3130:

Total noninterest income for the threesix months ended MarchJune 31,30, 2026 increased $2.1$4.3 million, or 9%, compared to the threesix months ended MarchJune 31,30, 2025. This is primarily the result of an $0.8$1.3 million increase in the gain on sale of mortgage loans andloans, a $0.8$0.6 million increase in the gain on sale of other loans and assets.assets and an $0.8 million gain on the early redemption of subordinated debt. Included in gain on sale of other loans and assets for the threesix months ended MarchJune 31,30, 2026 was $0.4 million related to changes in the value of loans held for sale. Trust income increased $0.4$0.9 million due to revenue for assets under management and income from bank owned life insurance increased $0.3$0.5 million largely due to claims received as well as the impact of a stable value wrap restructure completed in the first quarter of 2025. Offsetting these increases, was a decrease of $0.7$0.8 million in swap fee income as a result of lower volume for new interest rate swaps entered into by our commercial loan customers.

Other itemsItems impacting noninterest income in the threesix months ended MarchJune 31,30, 2025 include gains on the sale of VISA shares of $5.1 million, offset by net security losses of $5.1 million, resulting from the sale of available for sale securities that were sold in order to reinvest into higher yielding investments.

The following table presents the components of noninterest expense for the threesix months ended MarchJune 3130:

Noninterest expense increased $4.3$2.3 million, or 6%,2%, for the threesix months ended MarchJune 31,30, 2026 compared to the same period in 2025. This increase is primarily the result of a $2.5$4.6 million increase in salaries and benefits expense. Contributing to the higher salary expense in 2026 was a higher number of full time equivalent employees, partially due to the Center acquisition. The number of full time equivalent employees totaled 1,5381,562 at MarchJune 31,30, 2025 and 1,5921,589 at MarchJune 31,30, 2026.

Furniture and equipment expense increased $0.6 million, primarily due to higher software related expenses. The decrease of $0.8 million in other professional fees and services is a result of services and advisors contracted for several areas in the prior period, none of which were individually material. In addition, merger and acquisition related expenses were $4.1 million in the first six months of 2025 due to the Center acquisition with only $0.2 million recognized in the current period.

The provision for income taxes increased $1.3$4.4 million for the threesix months ended MarchJune 31,30, 2026, compared to the corresponding period in 2025, primarily due to the higher level of income before tax.

We applied the “annual effective tax rate approach” to determine the provision for income taxes, which applies an annual forecast of tax expense as a percentage of expected full year income, for the threesix months ended MarchJune 31,30, 2026 and 2025.

We generate an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest, income from bank-owned life insurance and tax benefits associated with low income housing tax credits, all of which are relatively consistent regardless of the level of pretax income. These provided for an effective tax rate of 20.5%20.6% and 20.3%20.5% for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

As of MarchJune 31,30, 2026, our deferred tax assets totaled $43.0$43.2 million. Based on our evaluation, we determined that it is more likely than not that all of these assets will be realized. As a result, a valuation allowance against these assets was not recorded. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved forecasts, evaluation of historical earnings levels and consideration of potential tax strategies. If future events differ from our current forecasts, we may need to establish a valuation allowance, which could have a material impact on our financial condition and results of operations.