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FIRST COMMONWEALTH FINANCIAL CORP /PA/ (FCF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS of $0.35 rose $0.04 QoQ but fell $0.09 YoY; core efficiency improved QoQ to 56.07% while NIM dipped 2 bps to 3.54% . Management stated EPS met consensus on the call . S&P Global consensus data were unavailable at time of analysis.
  • Credit costs moderated: provision fell to $6.5M from $10.6M in Q3; NPLs declined to 0.68% of loans from 0.83% QoQ, though net charge-offs rose to 0.61% (annualized) on previously reserved commercial credits .
  • Outlook improved: management now guides NIM to be stable in Q1’25 and expand ~10–20 bps by YE 2025, aided by macro swap maturities (8–10 bps lift) and positive replacement yields; mid‑single‑digit 2025 loan growth targeted; fee income guided to $22–$23M in Q1; expenses ~$68–$69M in Q1 .
  • Strategic catalysts: announced CenterBank acquisition (Cincinnati) with expected ~$0.01 EPS accretion per quarter beginning Q3’25; share buybacks paused until after close; declared $0.13 dividend .
  • Narrative for 2025: balance sheet “primed for growth” with deposit growth and lower borrowings; loan growth emphasis in C&I, CRE and Equipment Finance; continued efficiency focus .

What Went Well and What Went Wrong

  • What Went Well

    • EPS met consensus per management; core operating leverage improved as noninterest expense declined QoQ and fee income rose despite Durbin headwinds .
    • Asset quality trends improved QoQ: NPLs fell $13.3M and criticized loans declined; ACL/loans fell to 1.32% on improved factors and mix .
    • Deposit dynamics healthy: average deposits +$207.1M QoQ (8.7% annualized); total cost of deposits edged down 1 bp to 2.07% .
    • Quote: “We stabilized the margin, grew deposits, managed expenses… 2024 was a year that sets us up well for 2025” – CEO Mike Price .

  • What Went Wrong

    • YoY profitability lower: EPS $0.35 vs $0.44 in Q4’23; ROAA 1.23% vs 1.56% YoY; efficiency ratio deteriorated YoY to 56.07% (vs 53.00%) as credit costs and Durbin reduced earnings power .
    • Net charge-offs rose QoQ to $13.7M (0.61% ann.), largely from three commercial credits (mostly previously reserved); net interest income declined QoQ and YoY amid slight NIM pressure .
    • End‑of‑period deposits decreased $67.5M QoQ on seasonal public fund outflows; AOCI moved adversely QoQ, pressuring equity .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($M)$95.74 $94.99 $96.52 $95.08
Noninterest Income ($M)$24.30 $25.21 $24.70 $25.34
Total Revenue – Core ($M)$120.36 $120.51 $121.51 $120.67
Diluted EPS ($)$0.44 $0.36 $0.31 $0.35
Core Diluted EPS ($)$0.44 $0.36 $0.31 $0.35
Core Efficiency Ratio (%)53.00 53.63 56.66 56.07
Net Interest Margin (FTE, %)3.65 3.57 3.56 3.54
Provision for Credit Losses ($M)$(1.87) $7.83 $10.62 $6.49
Net Charge-offs ($M)$16.34 $4.40 $8.79 $13.69

KPIs and Capital

KPIQ4 2023Q3 2024Q4 2024
ROAA (%)1.56 1.08 1.23
ROATCE (%)20.78 13.09 14.40
NPLs / Loans (%)0.44 0.83 0.68
NCOs / Avg Loans (ann., %)0.72 0.39 0.61
ACL / Loans (%)1.31 1.41 1.32
CET1 (%)11.2 12.0 12.1
TCE / TA (%)8.38 8.84 9.12
Book Value / Share ($)12.87 13.79 13.81
Dividend / Share ($)0.125 0.130 0.130

Loan Portfolio (EOP, $M)

CategoryQ4 2023Q3 2024Q4 2024
Commercial, Financial & Ag.1,310.4 1,263.0 1,250.7
Commercial Real Estate3,053.2 3,069.4 3,124.7
Equipment Finance232.9 366.5 427.3
Real Estate Construction (Comm.)541.6 522.5 475.4
Closed-end Mortgages1,926.3 1,879.0 1,849.2
HELOC490.6 495.4 492.5
Auto & RV1,278.0 1,275.8 1,280.6
Total Loans & Leases8,968.8 8,965.5 8,983.8
Total Deposits (EOP, $M)9,192.3 9,745.6 9,678.0

Estimates vs. Actuals

  • Wall Street consensus data from S&P Global were unavailable at time of analysis due to data limits. Management stated Q4 EPS matched consensus at $0.35 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)FY2025 exitQ3’24 view: NIM to trend ~10 bps lower by YE’25 (mid‑3.40s) Stable in Q1’25, then expand ~10–20 bps by YE’25; swaps add 8–10 bps; first $150M matures May 1 Raised
Loan GrowthFY2025Return to normalized mid‑single‑digit (Q3’24) Mid‑single‑digit growth reiterated; C&I/CRE, Equipment Finance drivers Maintained
Fee IncomeQ1 2025N/A$22–$23M in Q1’25; gradual growth through 2025 New
Noninterest ExpenseQ1–Q4 2025Q4’24 implied $67–$68M for Q4 (from Q3 call) $68–$69M in Q1’25; +$2M in Q2 on merit; +~$1.3M/quarter 2H’25 post-Center Updated higher path
Net Charge-offsLTN/ALong‑term NCOs 25–30 bps New
M&A EPS Accretion2H 2025N/ACenterBank +~$0.01 EPS per quarter starting Q3’25; ~3M shares to be issued New
DividendOngoing$0.13/share Q3’24 $0.13/share declared for Q4’24 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current (Q4 2024)Trend
NIM trajectoryQ2: +5 bps QoQ to 3.57%; Q3: stable at 3.56%, tailwinds include swaps, deposit costs easing; headwind from cuts 3.54% in Q4; 2025 exit NIM now guided up 10–20 bps; swaps add 8–10 bps Improving outlook
Deposit costs/rotationQ3: rotation slowing; deposit cost increases decelerating; strong deposit growth Total deposit cost down 1 bp to 2.07%; average deposits up; end-of-period down on seasonal public funds Moderating cost, stable growth
Credit qualityQ2–Q3: Centric loans drove outsized charges; criticized up then improved; NCOs 0.20–0.39% Provision down to $6.5M; NPLs down QoQ to 0.68%; NCOs 0.61% from three reserved credits Stabilizing with residual cleanup
Loan growth mixQ2: equipment finance growth; Q3: loans flat-to-down with EF offset; CRE selective EF +$61M in Q4; CRE activity improved; push to grow C&I, SBA, indirect Ramping into 2025
Durbin fee impactQ3: ~$3M QoQ hit; offset by wealth/SBA/mortgage/BOLI Full-year Durbin -$6.7M; fees still up YoY; Q1’25 fees $22–$23M guided Managed impact
Balance sheet/liquidityQ3: excess cash suppressed NIM; paid down BTFP; L/D 92.5% Borrowings down; AOCI rose QoQ; balance sheet “primed for growth” Improved positioning
M&A strategyQ3: open to small/large deals; disciplined CenterBank deal in Cincinnati; strategic expansion with accretion Executing tuck‑in

Management Commentary

  • “We met consensus earnings estimates of $0.35 per share… we stabilized the margin, grew deposits, managed expenses… 2024 sets us up well for 2025.” – CEO Mike Price .
  • “We believe the net interest margin can expand in 2025… stable in Q1, then expand steadily to end the year 10–20 bps higher… swaps alone will add 8–10 bps.” – CFO Jim Reske .
  • “NPLs declined from 0.83% to 0.68%… elevated charge-offs reflected three nonperforming loans previously reserved.” – CEO Mike Price .
  • On growth mix: “We’ve never been stronger in C&I, CRE, SBA, equipment finance, indirect and consumer lending… we will strive for mid‑single‑digit loan growth this year.” – CEO Mike Price .
  • On CenterBank: “This moves us maybe half a decade forward… ~$0.01 per share per quarter starting in Q3 2025.” – CFO Jim Reske .

Q&A Highlights

  • Fees: Card income stabilized at lower Durbin level; growth expected from SBA, mortgage, wealth, and swap fees; Q1’25 fee guide $22–$23M .
  • NIM mechanics: Asset‑side driven—positive replacement yields (~40–50 bps), swaps add 8–10 bps; deposit cost outlook conservative with opportunity to lower CDs; first $150M swap roll‑off May 1 .
  • Expenses: Q1’25 ~$68–$69M; Q2 +$2M from merit; +$1.3M/quarter in 2H’25 post‑CenterBank close .
  • Credit: Long‑term NCOs targeted at 25–30 bps; Centric‑related problem loan migration improving; Q4 charge‑offs largely previously reserved .
  • M&A/Capital: ~3M shares to be issued for CenterBank; buybacks paused until after close; accretive ~$0.01/sh per quarter starting Q3’25 .

Estimates Context

  • S&P Global consensus (EPS, revenue) was unavailable due to data limits at time of analysis. Management stated Q4 EPS matched consensus at $0.35 . Given the raised NIM trajectory (vs. prior quarter guidance) and mid‑single‑digit loan growth plan, Street 2025 NII and EPS trajectories may need upward revision; Q1’25 fee and expense guidance provides near‑term modeling anchors .

Key Takeaways for Investors

  • Raised NIM outlook (stable Q1 then +10–20 bps by YE’25) is a notable narrative shift from Q3; macro swap roll‑offs and positive replacement yields are tangible tailwinds .
  • Asset quality trajectory improved (NPLs down QoQ) though charge‑offs elevated from pre‑reserved commercial credits; long‑term NCO guide 25–30 bps implies normalization ahead .
  • Balanced growth strategy: EF momentum, renewed CRE activity, and targeted C&I hiring underpin mid‑single‑digit loan growth goal for 2025 .
  • Fee resilience despite Durbin (-$6.7M 2H’24) supports diversified revenues; Q1’25 $22–$23M guide provides visibility .
  • Expense cadence clearly laid out (Q1/Q2/2H’25), aiding operating leverage modeling as revenues improve .
  • CenterBank deal expands Cincinnati presence with near‑term EPS accretion; buyback pause is temporary until close .
  • Subsequent item: sale of remaining Visa‑B shares in Jan ’25 (~$5.1M gain) used to reposition securities (from ~2.6% to ~5.4% yield) supports NIM path in Q1’25 .

Appendix: Additional Details

  • Fourth Quarter Highlights: Average deposits +$207.1M QoQ; EOP deposits −$67.5M on seasonal public fund outflows; NIM 3.54% (−2 bps QoQ), total cost of deposits 2.07% (−1 bp QoQ) .
  • Dividend/Capital: Declared $0.13 dividend; capital ratios Total/Tier 1/Leverage/CET1 at 14.6%/12.9%/10.6%/12.1% .
  • Noninterest Income: +$0.8M QoQ ex prior quarter’s securities gain; drivers included swap fees, mortgage GOS, LP gain; BOLI lower QoQ .
  • Noninterest Expense: Core $69.0M (−$1.0M QoQ) on lower ops losses and salaries/benefits, partly offset by PA shares tax .