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FC

FIRST COMMONWEALTH FINANCIAL CORP /PA/ (FCF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 results were broadly in line on EPS but softer on revenue: diluted EPS was $0.32 (vs S&P Global consensus $0.321, in line) and S&P operating revenue was $112.1M vs $117.6M consensus (miss), driven by lower noninterest income and day-count seasonality while provision remained modest . S&P Global estimates shown with asterisks are from S&P Global.
  • Net interest margin expanded 8 bps sequentially to 3.62% as deposit costs fell to 1.99% despite 7.7% annualized end-of-period deposit growth; management now expects NIM to reach the “high-3.70s” by year-end on three Fed cuts (or “high-3.80s” with no cuts), aided by expiring macro swaps .
  • Asset quality improved: net charge-offs dropped to 0.14% (annualized) and nonperforming loans declined sequentially; ACL/loans held at 1.32% .
  • Operating expenses rose above internal expectations (to $71.1M) on incentive true-ups and weather, prompting a new 2025 run-rate guide of $71–$73M per quarter; dividend was raised 3.9% to $0.135 .
  • Strategic update: FCF closed its CenterBank acquisition on April 30 and completed systems conversion in early June, adding Cincinnati density and modest NIM upside (1–2 bps), with loan growth still targeted at mid-single-digits for 2025 .

What Went Well and What Went Wrong

  • What Went Well
    • NIM and funding: NIM rose 8 bps to 3.62% as deposit costs fell 8 bps to 1.99% even while deposits grew; management sees continued NIM expansion through swap roll-offs and replacement yields .
    • Credit trends: NCOs improved to 0.14% (from 0.61% in Q4) and NPLs declined; criticized loans fell $33.7M QoQ, with ACL coverage steady at 1.32% of loans .
    • Strategic progress: CenterBank close adds talent and a commercially focused franchise in Cincinnati; management cites expected efficiency and margin benefits post-conversion .
  • What Went Wrong
    • Fee revenue softness: Noninterest income fell $2.8M QoQ on lower SBA gains and seasonality; management flagged Durbin headwinds ($3.5M/quarter) but noted offset from service charges, wealth/insurance, and swaps .
    • Expenses above plan: Noninterest expense of $71.1M exceeded prior $60–$69M guide due to ~$1.5M incentive true-up and ~$0.7M higher snow removal, prompting a higher 2025 run-rate guide .
    • Revenue miss vs consensus: S&P operating revenue of $112.1M came in below $117.6M consensus; lower fee income and only modest NII growth offset a helpful provision backdrop . S&P Global values marked with asterisks.

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Diluted EPS ($)$0.31 $0.35 $0.32
S&P Operating Revenue ($M)110.47*113.83*112.07*
Net Interest Income ($M)$96.52 $95.08 $95.52
Noninterest Income ($M)$24.70 $25.34 $22.50
Provision for Credit Losses ($M)$10.62 $6.49 $5.74
Net Interest Margin (FTE, %)3.56% 3.54% 3.62%
Core Efficiency Ratio (%)56.66% 56.07% 59.08%
ROAA (%)1.08% 1.23% 1.14%

Notes: S&P Operating Revenue approximates net interest income + noninterest income – provision; S&P Global values marked with asterisks. Values retrieved from S&P Global.

KPIs and Balance Sheet

  • Profitability and capital
    • Return on avg tangible common equity: 13.02% in Q1 (vs 14.40% in Q4) .
    • CET1/Tier 1/Total/Leverage: 12.2% / 12.9% / 14.7% / 10.7% (Q1) .
    • Tangible book value/share: $10.44 (Q1) vs $10.04 (Q4) .
  • Credit and funding
    • NCOs/Avg loans (annualized): 0.14% (Q1) vs 0.61% (Q4) .
    • NPLs/Loans: 0.65% (Q1) vs 0.68% (Q4) .
    • Cost of deposits: 1.99% in Q1 vs 2.07% in Q4 .
  • Growth
    • End-of-period loans: $9.09B (Q1) vs $8.98B (Q4) .
    • End-of-period deposits: $9.86B (Q1) vs $9.68B (Q4) .
    • Loan-to-deposit ratio: 92.6% (Q1) .

Loan Portfolio Mix (End of Period)

Category ($M)Q1 2025Q4 2024Q1 2024
Total Commercial$5,399.5 $5,278.1 $5,205.1
Total Consumer$3,693.7 $3,705.7 $3,794.8
Equipment Finance (included above)$485.8 $427.3 $279.9
Total Loans & Leases$9,093.1 $8,983.8 $8,999.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (exit)FY 2025Flat in Q1, expand later in 2025 High 3.70s with 3 Fed cuts; high 3.80s with no cuts Raised/clarified trajectory
Noninterest Expense2025 quarterly run-rate$60–$69M (prior Q1 guide) $71–$73M per quarter (incl. CenterBank) Raised
Fee Income2025 quarterly pathQ1 guide $22–$23M Q2 ~$23–$24M; Q3 +$1M; Q4 −$1M (seasonal) Provided quarterly cadence
Loan GrowthFY 2025Mid-single-digit Mid-single-digit reaffirmed Maintained
DividendQuarterly$0.13 (Q4 2024) $0.135 (Q1 2025) Raised 3.9%
Buybacks2025Program capacity remaining $6.7M (Q4) $6.7M capacity; none in Q1; evaluate after blackout Maintained flexibility

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
NIM trajectory3.56%; down 1 bp; excess cash −9 bps headwind 3.54%; total deposit cost 2.07% (−1 bp QoQ) 3.62% (+8 bps); deposit cost 1.99%; swaps rolling off Improving
Deposit costsMix shift toward time; Durbin begins Deposit costs easing slightly Down 8 bps QoQ despite growth; conservative guide Easing
Fee income/DurbinDurbin −$3.0M QoQ; offsets in SBA, BOLI BOLI/other gains offset; restructure signaled Noninterest income −$2.8M QoQ; Durbin $3.5M/quarter absorbed by other fees Stabilizing ex-seasonality
Credit qualityHigher provision; NPLs up; NCOs 0.39% Provision down; NPLs down; NCOs 0.61% incl. previously reserved loans Provision $5.7M; NCOs 0.14%; criticized down $33.7M Improving
Equipment financePortfolio +$49.8M QoQ Continued growth Strong pipeline; competitor pullback aiding growth Positive
M&A (CenterBank)N/AApprovals; planned close in 2Q25 Closed Apr 30; conversion early June; modest NIM uplift Integration underway
Macro/tariffsN/AN/ATariff uncertainty; clients generally adapting; steel supportive Watchful

Management Commentary

  • “We are pleased to report a strong start to 2025… annualized loan growth of 4.4%… deposits increased 7.7% annualized… As we look ahead, I am thrilled to welcome CenterBank’s employees and customers” — T. Michael Price, CEO .
  • “Deposit costs fell by 8 basis points even as we grew deposits… our NIM [can] expand to the high 3.70s by the end of the year… about 7 bps of the NIM expansion… comes from the expiration of macro swaps” — James Reske, CFO .
  • “Expenses increased $2.1 million… including about $1.5 million in [prior-year] incentive payments and a $700,000 increase in snow removal costs… [2025] noninterest expense should be in the $71–$73 million range” — James Reske, CFO .
  • “Our consumers appear to be in good shape… tariff uncertainty… our pipelines remain strong, and we have not identified any specific credit impacts yet” — T. Michael Price, CEO .

Q&A Highlights

  • Deposit costs/NIM: Management reiterated a conservative stance, assuming flat aggregate deposit costs from 1.99% despite market cuts; if deposit rates fall further, NIM could exceed the “high-3.70s” exit target. Swaps roll-off (e.g., $150M expiring “tomorrow”) add incremental spread income and support NIM through 2026 .
  • Expenses: FTE up on targeted commercial hires; after Q1 true-ups/weather, management will scrutinize run-rate and sees opportunities to improve efficiency; guide is $71–$73M per quarter (incl. CenterBank) .
  • Equipment finance momentum: Healthy application volumes; competitor pullbacks benefiting FCF; new talent adds capacity .
  • SBA gains: QoQ decline tied to timing/mix; management expects “frothier” gains later in 2025 as construction projects close; margin intact .
  • Capital return: $6.7M buyback capacity remains; none in Q1 pending M&A close; will reassess post-blackout considering share levels and organic growth needs .

Estimates Context

Q3 2024Q4 2024Q1 2025
EPS Actual ($)0.31 0.35 0.32
EPS Consensus ($)0.356*0.351*0.321*
S&P Operating Revenue Actual ($M)110.47*113.83*112.07*
S&P Operating Revenue Consensus ($M)119.53*119.92*117.60*
  • Q1 2025: EPS in line; S&P operating revenue missed (~$5.5M below), with management pointing to seasonality (fewer days), lower SBA gains, and absence of Q4’s unusual gains; NII was modestly higher QoQ and provision lower, partially offsetting fee pressure .
  • Q4 2024: EPS in line; operating revenue below consensus (driven by lower day count in Q1 vs Q4 not applicable here; Q4 had modest securities/BOLI benefits and lower provision) .
  • Q3 2024: EPS missed; revenue below consensus, impacted by Durbin (-$3.0M QoQ) and higher provision/NCOs .
    Notes: S&P Global values marked with asterisks. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Rate-sensitive upside: Swap expirations and conservative deposit-cost assumptions create positive asymmetry for NIM into late 2025–2026; each incremental cut not passed through to deposits and/or pricing discipline can push NIM toward the “high-3.80s” exit case .
  • Credit normalization underway: Sharp drop in NCOs and lower NPLs support stable provision needs; ACL remains a solid 1.32% of loans, above many peers, limiting downside risk if macro softens .
  • Expense vigilance after Q1 spike: Elevated Q1 OpEx was largely idiosyncratic; management has raised the run-rate guide and is seeking efficiencies post-CenterBank conversion, an execution watch item for margin leverage in 2H25 .
  • Fee income mix is adapting to Durbin: While interchange is a headwind, service charges, wealth/insurance, and swap fees are cushioning the impact; SBA gains expected to improve as projects close later in 2025 .
  • Cincinnati as a growth vector: CenterBank adds business-heavy customers and talent; expect rising contribution to C&I, mortgage, and treasury management over time with minimal NIM dilution risk .
  • Estimates likely to modestly adjust: Sell-side may trim revenue (S&P “operating revenue”) on fee cadence and reset OpEx to the higher run-rate, while maintaining EPS supported by NIM trajectory and benign credit .
  • Near-term trading setup: Mixed print (EPS in line, revenue miss) but constructive NIM/credit message and dividend hike could underpin shares; monitor Q2 fee recovery and OpEx discipline for confirmation of 2H operating leverage .

References

  • Q1 2025 8-K press release and financial tables
  • Q1 2025 earnings call transcript (prepared remarks and Q&A)
  • Q4 2024 8-K press release and financials
  • Q3 2024 press release (trend context)
  • CenterBank acquisition close and conversion press releases

S&P Global disclaimer: All values marked with an asterisk (*) are retrieved from S&P Global.