First Commonwealth Financial Corporation Q4 FY2025 earnings call

• Headline performance: Core EPS $0.43 beat estimates, NIM expanded to 3.98%, core ROA 1.45%, core efficiency ratio 52.8%. - Net interest income growth: Driven by margin expansion, lower deposit costs, and good loan volumes. - Fee income: Flat, with SBA gains offsetting declines in wealth and mortgage. - Provision for credit losses: Decreased to $7 million, down from prior quarter. - Stock repurchases: $23.1 million repurchased in Q4, total 2.1 million shares in 2025. - Acquisition impact: Growth in deposits 3% annually from Center Bank acquisition. - NIM guidance: Near-term dip followed by gradual improvement to ~4% by end of 2026. - Loan portfolio: $225 million commercial loan portfolio moved to held for sale, with potential sale affecting liquidity and capital ratios.

In the fourth quarter, core EPS was $0.43 per share. Net interest margin expanded to 3.98%, core ROA was 1.45%, and core efficiency ratio was 52.8%. Average deposits grew 2.8% (72 million) and total loans grew 1.2%. Net interest income grew due to margin expansion, lower deposit costs, and good loan volumes. Fee income was flat, with SBA gains offsetting declines in wealth and mortgage. The provision for credit losses decreased to $7 million from the prior quarter. Nonperforming loans were 94 basis points, with 32 basis points guaranteed. In 2025, net interest income was $427.5 million, up $47.2 million year-over-year. Average deposits grew 6.1% for the year, and noninterest income fell $3 million year-over-year but fee businesses were filling the gap.

• NIM: Near-term dip expected, then gradual improvement to around 4% by end of 2026. - Loan growth: Expected to be mid-single digits, focusing on organic growth. - Stock buyback: Will continue to use the $25 million additional authorization, with activity sensitive to stock price.

• Potential impact of loan sale: Reinvestment of proceeds from selling $225 million loans into lower-yielding securities with a rate differential of ~1.5%. - Credit risks: NPLs at 94 basis points, but reserves are strong and manageable. - Market risks: Fluctuations in deposit costs and loan yields affecting margin and income.

Q: On the credit side, thoughts on net charge-offs and provision in 2026?

A: Charge-off guidance is 25 to 30 basis points. Reserve levels remain strong, consistent with peers, and credit costs are manageable.

Q: Is the loan sale a one-off or recurring?

A: It's more of a one-off, related to the bank exiting the Philadelphia MSA commercial banking market.

Q: Near-term expectations for stock buybacks?

A: Stock buyback activity is sensitive to stock price. We intend to be aggressive with the authorization but will adjust based on price movements