First Commonwealth Financial (FCF) Q3 2024 earnings summary

Executive summary

• Core earnings per share for Q3 2024 were $0.31, with net income of $32.1 million, down from both Q2 2024 and Q3 2023; tangible book value per share rose $0.47 to $10.03.

• Net interest margin was 3.56%, down 1 basis point sequentially and 20 basis points year-over-year, as rates fell in anticipation of a Fed cut.

• Noninterest income was resilient, declining only slightly despite a $3 million drop in interchange income from the Durbin Amendment, offset by gains in SBA, service charges, wealth management, and BOLI income.

• Expenses were elevated at $70.1 million, up $4.3 million from the prior quarter, including one-time items such as operational losses and severance.

• Customer satisfaction and Net Promoter Scores reached five-year highs, exceeding industry benchmarks.

Financial highlights

• Pre-tax, pre-provision net revenue was $50.9 million, with a pre-tax, pre-provision ROA of 1.73% and efficiency ratio of 56.66%.

• Provision expense rose to $10.6 million, up $2.8 million from Q2, driven by specific reserves on legacy and acquired loans; net charge-offs were $8.8 million.

• Deposit growth was strong, with an 8% annualized increase year-to-date and period-end deposits up $336.6 million (14.2% annualized); loan-to-deposit ratio fell to 91.18%.

• Allowance for credit losses was $126.1 million (1.41% of loans), up from $117.7 million (1.31%) at year-end.

• Tangible book value per share increased to $10.03, aided by a $28.7 million reduction in AOCI.

Outlook and guidance

• Noninterest income is expected to be $22–$24 million in Q4, with noninterest expense projected at $67–$68 million.

• NIM is forecasted to remain stable in the mid-350s through Q1 2025, then gradually decline to the mid-340s by year-end 2025, assuming mid-single-digit loan growth.

• Deposit cost increases are expected to plateau or decline in Q4, with deposit betas around 25% in a rate-cutting cycle.

• Card-related interchange income is projected to decline by $6.3 million in 2024 and $12.8 million in 2025 due to Durbin Amendment impact.

• Loan growth is expected to reaccelerate to mid-single digits in 2025, supported by new commercial banking talent and ample liquidity.