First Commonwealth Financial Corporation Q2 FY2025 earnings call

• Core earnings per share of $0.38 exceeded consensus estimates. - Net interest margin expanded due to improved loan yields, lower deposit costs, and the CenterBank acquisition. - Strong loan growth of 8.1% annualized across various segments. - Noninterest income grew from contributions in mortgage, SBA, interchange, wealth, etc. - Deposit franchise remains strong with 9% YTD growth to $10.1 billion. - Smooth integration of CenterBank in Cincinnati, bolstering presence.

Core earnings per share was $0.38, surpassing consensus by $0.03. Net interest margin expanded from 3.62% in Q1 to 3.83% in Q2, a 21 basis point increase, with net interest income rising $10.7 million to $106.2 million. Noninterest income increased by $2.1 million to $24.7 million. Total deposits grew 9% YTD to $10.1 billion, with the Community Pennsylvania region accounting for 37% of deposit funding. The CenterBank acquisition closed on May 1 and converted in early June, adding $295 million in loans and $278 million in deposits.

• Forward NIM guidance based on revised baseline forecast with 2 Fed cuts by year-end, expecting NIM to expand to low to mid 3.90s by year-end. - Net interest income expected to be between $110 million to $115 million per quarter for remainder of 2025. - Share repurchase authority increased to $31.2 million with new $25 million authorization from the board.

• Impact of a single commercial floorplan loan moved to nonaccrual and reserve, operating under forbearance agreement. - Seasonality effects on noninterest income and expenses. - Potential pressure on loan spreads and need to price deposits to fund loan growth.

Q: Did you give a guidance range for expenses in the third quarter or the back half of the year?

A: Jim Reske discussed seasonality and expense trends, noting some trail-off in noninterest income and expenses in third and fourth quarters with potential bounce back in first quarter of next year.

Q: Talked about repurchases, appetite for stock buybacks?

A: Jim Reske explained approach to share repurchases, stating they use a pricing grid with maximum cap and keep dry powder for dips in price.

Q: Margin, loan yields replacing 42 bps higher, any guidepost for July?

A: Jim Reske and others discussed loan yield trends, noting consistent replacement yields and that it should persist with certain conditions.

Q: M&A, discussions and priorities?

A: Thomas Price talked about M&A approach, mentioning they look at smaller deals, bow out on larger deals, and focus on low-risk execution with deposits keeping pace with loan growth.

Q: Organic loan growth, pipeline and momentum?

A: Thomas Price and McCuen discussed loan pipeline, noting good pipeline, summer wall and payoffs in third quarter, and expectation of strong finish in fourth quarter.

Q: Deposits, NIM guide, dynamics?

A: Jim Reske discussed deposit dynamics and NIM, explaining model considerations, deposit growth, loan growth funding, and margin guidance.

Q: Securities, percentage of total assets?

A: Jim Reske said 13.5% is adequate, okay with that percentage as they have strong liquidity and don't need higher percentage for liquidity.

Q: Markets, growth opportunities, next Ohio?

A: Thomas Price and others discussed market growth opportunities, stating they can grow within existing markets, fill in market share gaps, and have room for product penetration.

Q: Credit quality, floorplan nonaccrual, impact on margin?

A: Brian Sohocki and others discussed credit quality, noting an isolated event with a single commercial floorplan loan, its impact on nonaccruals and margin, and that the portfolio is strong otherwise.