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FC

FIRST COMMONWEALTH FINANCIAL CORP /PA/ (FCF)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered stronger profitability: diluted EPS rose to $0.39 (+$0.08 YoY, +$0.07 QoQ) on NIM expansion to 3.92% and disciplined expenses; core EPS was $0.39 .
  • EPS missed Wall Street consensus by $0.02 ($0.39 vs $0.41); total revenue was slightly below Street by ~$0.3M on our comparable definition (company total revenue $135.96M vs consensus $136.3M); results were driven by lower funding costs and loan growth, offset by higher provision tied to an isolated dealer floorplan issue .
  • Management signaled near‑term NIM pressure (~5 bps) from Fed cuts in Q4, then stabilization around ~3.9% in 2026; expenses guided ~+3% in 2026; loan and deposit growth targeted mid‑single digits .
  • Capital and liquidity remain solid (CET1 12.0%; total risk-based capital 14.4%); buybacks continue with $20.7M remaining authorization at quarter‑end; quarterly dividend maintained at $0.135 .
  • Potential stock reaction catalysts: resolution of the floorplan credit in Q4, confirmation of deposit mix improvement, equipment finance momentum, and clarity on NIM trajectory and rate‑cut path .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded 9 bps QoQ to 3.92% (36 bps YoY), driven primarily by an 8 bps improvement in cost of funds; NII (FTE) increased $4.9M QoQ to $111.5M .
  • Efficiency improved: core efficiency ratio fell to 52.3% (−176 bps QoQ; −436 bps YoY), reflecting disciplined expense management and spread income improvement .
  • Asset quality metrics improved: nonperforming loans fell $10.8M QoQ to $88.7M (0.91% of loans), with criticized loans down $6.7M; ACL/loans remained robust at 1.34% .
    • CEO: “We delivered strong net interest income growth, maintained disciplined expense management, and improved asset quality metrics.”

What Went Wrong

  • Provision and charge-offs rose: provision increased to $11.3M (+$2.4M QoQ) and net charge‑offs to $12.2M (0.51% of avg loans), largely due to an isolated dealer floorplan charge‑off and sale of five acquired loans .
  • Fee income was flat YoY and slightly lower QoQ excluding securities gains, reflecting softer gain on sale of other loans and OREO‑related gains in the prior quarter; card‑related interchange remains structurally lower post‑Durbin .
  • Linked‑quarter loan growth headwinds from CRE payoffs persisted; management highlighted competition and more aggressive agency/permanent markets compressing yields ~25 bps in metro markets .

Financial Results

Core and Reported Financials

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income ($USD Millions)$96.515 $106.241 $111.123
Noninterest Income ($USD Millions)$24.698 $24.749 $24.857
Total Revenue ($USD Millions)$121.361 $131.331 $135.962
Diluted EPS ($USD)$0.31 $0.32 $0.39
Core Diluted EPS ($USD)$0.31 $0.38 $0.39
Net Interest Margin (FTE, %)3.56% 3.83% 3.92%
ROAA (%)1.08% 1.11% 1.34%
Core Efficiency Ratio (%)56.66% 54.06% 52.30%

Actual vs Consensus (Q3 2025)

MetricQ3 2025 ActualQ3 2025 ConsensusSurprise
Diluted EPS ($USD)$0.39 $0.41*-$0.02 (miss)*
Total Revenue ($USD Millions)$135.962 $136.300*-$0.338M (miss)*

Values with asterisks retrieved from S&P Global; revenue definitions may vary between company “Total Revenue” and S&P Global’s consensus construct.*

Asset Quality KPIs

MetricQ3 2024Q2 2025Q3 2025
Nonperforming Loans ($USD Millions)$74.723 $99.507 $88.685
NPLs / Total Loans (%)0.83% 1.04% 0.91%
Net Charge-offs ($USD Millions)$8.785 $2.758 $12.247
NCOs / Avg Loans (annualized, %)0.39% 0.12% 0.51%
ACL / Loans (%)1.41% 1.39% 1.34%
Provision for Credit Losses ($USD Millions)$10.615 $8.898 $11.327

Balance Sheet and Funding

MetricQ3 2024Q2 2025Q3 2025
End-of-Period Deposits ($USD Billions)$9.746 $10.105 $10.231
End-of-Period Loans ($USD Billions)$8.966 $9.571 $9.688
Loan-to-Deposit Ratio (%)—95.1% 95.3%
CET1 (%)12.0% 12.0% 12.0%
Total Risk-Based Capital (%)14.5% 14.4% 14.4%
Tangible Book Value / Share ($USD)$10.03 $10.63 $10.94

Loan and Lease Portfolio Detail (End of Period)

Category ($USD Millions)Q3 2024Q2 2025Q3 2025
Commercial Real Estate$3,069.4 $3,366.3 $3,408.8
Equipment Finance Loans & Leases$366.5 $573.8 $634.4
Commercial, Financial & Other$1,263.0 $1,381.5 $1,374.6
Real Estate Construction (Commercial)$522.5 $424.4 $403.5
Closed-End Mortgages$1,879.0 $1,879.5 $1,858.5
Home Equity Lines$495.4 $510.8 $524.3
Auto & RV Loans$1,275.8 $1,339.7 $1,370.6
Total Portfolio Loans & Leases$8,965.5 $9,570.8 $9,688.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM TrajectoryQ4 2025Expansion trend supported by deposit repricing (context from Q2) ~5 bps near-term compression from Fed cuts; seasonal deposit outflows may require higher-cost borrowings Lowered (near term)
NIM LevelFY 2026Prior commentary biased to ~4% in some models (implied)~3.9% ±5 bps; stabilization as swaps expire ($175M in 2026) and fixed-rate loans reprice upward Calibrated
ExpensesFY 2026Not quantified~+3% YoY expense growth expected Introduced
Loan & Deposit GrowthFY 2026Growth mid-single-digit targetedMaintain mid-single-digit loan and deposit growth; deposit mix improvement expected (push toward transaction accounts) Maintained
Securities PortfolioThrough 2026—Hold roughly flat; replace runoff, prioritize liquidity for loan growth Policy stated
Credit Provision (Floorplan)Q4 2025Elevated in Q3 given issueNo incremental provision expected in Q4 for the floorplan credit; largely resolved by year-end Improved
Share RepurchasesRemainder 2025$25M new authorization (Q2) $20.7M capacity remaining; intend to execute most in 2025 (avg price $16.81 for 625k shares in Q3) Maintained
DividendQ4 2025$0.135 per share (raised 3.7% in April) $0.135 per share; payable Nov 21, 2025 (3.3% projected annual yield at $16.31) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
NIM & Funding CostsQ1: NIM +8 bps QoQ to 3.62% on lower cost of funds ; Q2: NIM +21 bps to 3.83% aided by deposit repricing, swaps, accretion NIM 3.92% (+9 bps QoQ); 8 bps cost-of-funds improvement; near-term ~5 bps pressure in Q4; 2026 ~3.9% ±5 bps Improving → Slight near-term pressure then stable
Deposit Growth & MixQ1/Q2: steady deposit growth, focus on retention and mix Retention strong (MM over 90%); repriced MM balances >3% from 83% to 49%; push to transaction accounts Improving mix
Credit QualityQ1: NPLs 0.65% of loans; NCOs 0.14% ; Q2: NPLs up on floorplan; provision +$3.2M NPLs down QoQ to 0.91%; provision higher on isolated floorplan and small acquired loan sale; NCOs elevated; no further floorplan provision expected in Q4 Normalizing post-issue
Equipment FinanceQ1/Q2: rapid growth (to $573.8M by Q2) Continued strong momentum; benefits from depreciation incentives; sustainable “next few quarters” Positive
Fee Income & DurbinQ2: fee income slightly down YoY post-Durbin Wealth/trust +$0.5M QoQ; brokerage +$0.4M QoQ; gain on sale other loans down Stabilizing, mix shift
Swaps / Balance SheetQ2: $150M swaps expired May 1 $25M macro swap expired Aug 25 (+2 bps NIM contribution); $75M expiring in Q4; $175M in 2026 Tailwinds shifting
M&A / GrowthQ2: Closed CenterBank; added $45.9M equity More conversations; preference for smaller deposit-rich acquisitions to bolster liquidity; aiming ~$14B scale Opportunistic

Management Commentary

  • CEO: “Our third quarter results reflect continued momentum across our core banking operations… strong net interest income growth, maintained disciplined expense management, and improved asset quality metrics.”
  • CFO: “Pre-tax, pre-provision net revenue was up by $4.3 million over last quarter… spread income overcame a modest decline in fee income and a negligible increase in expenses, leading to improvements in core EPS, NIM, core ROA, core ROTCE, and efficiency.”
  • On NIM outlook: “These factors could put some short-term downward pressure on the NIM in the fourth quarter. We expect it to recover in 2026 to roughly… about 3.9%, give or take 5 basis points.”
  • On deposit repricing: “Retention rates… around 80% for CDs… over 90% for money markets; we’ve managed pricing while growing balances.”
  • On technology: “We continue to add customer-facing features… improve productivity through RPA and AI.”

Q&A Highlights

  • Credit resolution: Analysts probed the dealer floorplan exposure; management confirmed remaining balance ~$16M, reserves ~$4.4M, and no incremental Q4 provision expected; majority resolved by year‑end .
  • NIM sensitivity: ~5 bps pressure in Q4 from rate cuts and seasonality; stabilization thereafter; swaps and fixed-rate repricing help blunt falling short rates .
  • Deposit dynamics: Active, biweekly pricing oversight; strong retention while lowering MM yields; ongoing push to low-cost transaction accounts .
  • Competitive lending and yields: Yields compressed ~25 bps in metro markets; agency/permanent markets aggressive on structure; selective approach maintained .
  • Equipment finance: Sustained growth expected next few quarters due to depreciation incentives and experienced team .
  • M&A stance: Increased conversations; preference for smaller, deposit-rich deals to enhance liquidity and fund growth, with target scale ~$14B .

Estimates Context

  • EPS: $0.39 actual vs $0.41 consensus (5 estimates) → miss by $0.02; driven by elevated provision tied to specific credits despite stronger spread income*.
  • Revenue: Company total revenue $135.96M vs S&P Global consensus $136.30M → slight miss of ~$0.34M; note measurement differences across sources*.
  • Potential estimate revisions: Street may modestly trim near-term NIM assumptions (~5 bps) and credit costs for Q4, while 2026 NIM stabilization (~3.9%) and mid-single-digit loan/deposit growth support medium-term EPS trajectory .

Values marked with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Spread-driven earnings power is intact: cost-of-funds improvements and deposit repricing continue to support NIM; watch for ~5 bps near-term compression then stabilization around ~3.9% in 2026 .
  • Credit normalization underway: NPLs declined QoQ; isolated floorplan charge-off largely ring-fenced with no expected Q4 provision; monitor residual wind-down and NCO trajectory .
  • Operating leverage improving: efficiency ratio down to 52.3% with limited NIE growth; management targets ~3% 2026 expense growth alongside mid-single-digit volume growth .
  • Capital return: Dividend maintained ($0.135) and buybacks likely to utilize most of $20.7M remaining authorization in 2025; ROTCE improving with tangible book up $0.31 QoQ .
  • Growth vectors: Equipment finance remains a bright spot; home equity growth emerging; deposit mix shift to low-cost transaction accounts supports spread resilience .
  • Strategic optionality: Management open to smaller, deposit-rich M&A to accelerate scale and liquidity; balances securities portfolio conservatism with lending growth .
  • Trading lens: Near-term stock moves likely keyed to clarity on Q4 NIM compression magnitude, floorplan resolution milestones, and deposit mix execution; medium-term upside hinges on NIM stability, fee resilience post-Durbin, and disciplined capital return .