Core Insights - First Commonwealth Financial reported a core EPS of $0.43 for Q4 2025, exceeding consensus estimates, with a net interest margin (NIM) of 3.98% and a core return on assets (ROA) of 1.45% [4][7] - The company anticipates a short-term dip in NIM of 5 to 10 basis points in Q1 2026, followed by gradual improvement to around 4% by the end of 2026 [1][7] Financial Performance - Spread income increased by $2.1 million from the prior quarter, primarily due to a 6 basis point rise in NIM, with earning-asset yields up 3 basis points and funding costs down 3 basis points [2] - Average deposits rose by 2.8% and total loans increased by 1.2% during the quarter, attributed to seasonal factors and larger commercial loan payoffs [3] Loan and Deposit Metrics - The bank designated approximately $225 million in commercial loans as held for sale, primarily from the Philadelphia market, with plans to reinvest proceeds into lower-yielding securities [9][10] - Deposit costs fell by 1 basis point to 1.83%, supporting the expansion of net interest income [3] Credit Quality - Non-performing loans (NPLs) rose to 94 basis points, totaling approximately $98 million, with reserves at 1.32% [6][13] - The provision for credit losses decreased to $7 million, down $4.3 million from the prior quarter, as the dealer floor plan credit issue neared resolution [12][14] Capital Management - The company repurchased $23.1 million of stock in Q4 2025, with an additional $25 million authorized for buybacks, funded by excess capital generation [17] - Core non-interest expenses increased by $1.7 million to $74.3 million, primarily due to salaries and benefits [16] Leadership Changes - Bank President and Chief Revenue Officer Jane Grebenc will retire at the end of March, marking a significant leadership transition [18]

Financial Data and Key Metrics Changes - Core EPS for Q4 2025 was $0.43 per share, exceeding consensus estimates, with a net interest margin (NIM) of 3.98% and a core return on assets (ROA) of 1.45% [4] - Average deposits grew by 2.8% and total loans increased by 1.2% in Q4, with net interest income rising due to an expanded margin [4][15] - For the year 2025, core EPS was $1.53, up from the consensus estimate of $1.40, and net interest income reached $427.5 million, an increase of $47.2 million year-over-year [8][10] Business Line Data and Key Metrics Changes - Fee income constituted 18% of total revenue, with a focus on growing this through a regional banking model, although it remained flat due to seasonal declines in wealth and mortgage services [6][9] - The provision for credit losses decreased by $4.3 million to $7 million, with non-performing loans (NPLs) increasing slightly to 94 basis points [6][7] - Core non-interest income for Q4 was $24.3 million, down $200,000 from the previous quarter, with SBA gain on sale income increasing but offset by declines in other areas [15] Market Data and Key Metrics Changes - Average deposit growth for the year was 6.1%, with significant contributions from money market accounts and CDs, while non-interest-bearing deposits also increased [9] - The company reported a loan growth of 8.2% annualized for the year, with commercial banking and equipment finance leading the growth [8][9] Company Strategy and Development Direction - The company aims to maintain a focus on low-cost deposit growth and diversify its lending businesses, with a strategic exit from certain markets to concentrate resources elsewhere [10][13] - The acquisition of CenterBank was completed, contributing to overall deposit growth and positioning the company for future expansion [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a strong NIM, projecting it to drift upward to around 4% by the end of 2026, despite anticipated short-term dips due to rate cuts [12][38] - The company is focused on managing credit costs and maintaining strong reserve levels, with expectations for stability in provisions and charge-offs [21][22] Other Important Information - The company repurchased $23.1 million of its stock in Q4, with a total of 2.1 million shares repurchased in 2025 [7][16] - Management indicated that operational expenses are expected to increase by approximately 3% year-over-year, with a focus on maintaining operating leverage [16][40] Q&A Session Summary Question: Credit side impact and loan issues - Management provided guidance on charge-offs at 25-30 basis points and noted that the dealer floor plan loan issue is nearing resolution with a remaining balance of $2.5 million [20][21] Question: Loan growth expectations - Management expects loan growth to continue at a rate of 5-7%, despite elevated payoffs in the previous year [28][29] Question: Buyback strategy - The company will be cautious with buybacks, sensitive to stock price movements, and intends to utilize its capital effectively [30][31] Question: NIM sustainability - Management discussed the potential for NIM to hover around 4% in 2027, with expectations for deposit costs to decrease further [55][56] Question: Securities yields outlook - The securities portfolio is expected to yield around 4.5% to 4.75%, with opportunities for reinvestment as the portfolio rolls over [76][79]