First Commonwealth Financial(US:FCF)2022-07-28 02:34Financial Data and Key Metrics Changes - Net income for Q2 2022 was $30.8 million, resulting in core earnings per share of $0.33, an increase of $0.04 from Q1 2022 [7] - Annualized loan growth was robust at 10.8% excluding PPP, with net interest margin expanding to 3.38%, contributing to a $5.5 million increase in net interest income to $73.7 million [7][20] - Noninterest income rose by $535,000 to $24.5 million, driven by increases in swap, interchange income, and mortgage, despite a decline in SBA gain on sale income [7] Business Line Data and Key Metrics Changes - Consumer lending led growth in the first half of 2022, while commercial lending is expected to pick up in the second half [9] - Commercial lending saw increased C&I line utilization, rising to 43.5% in Q2 from 35.9% at year-end [10] - Equipment finance ended the quarter with $21 million in footings, with projections for the year adjusted due to technology and project headwinds [11] Market Data and Key Metrics Changes - Average deposits grew by 6.7% annualized in Q2, with noninterest-bearing checking deposits increasing by 10% [14] - The bank's deposit base consists of 34% noninterest-bearing checking accounts, with 66% being businesses [14] - Charge-offs remained low at 9 basis points annualized, with nonperforming loans (NPLs) at $35.7 million, or 50 basis points of total loans [16] Company Strategy and Development Direction - The company aims to maintain momentum in loan growth, targeting high single-digit growth for the second half of 2022 [8] - There is a focus on expanding digital tools and enhancing customer interactions, with over 70% penetration of digital banking platforms [17] - The company is committed to growing through M&A, particularly in Pennsylvania and Ohio, while being selective about acquisitions [69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth momentum despite potential economic slowdowns [28] - The company anticipates continued margin expansion, benefiting from a rising interest rate environment [31] - There is an expectation for SBA gain on sale income to return to a run rate of $2 million to $2.5 million per quarter in the second half of 2022 [13] Other Important Information - The effective tax rate for the company is 19.7% [25] - The company repurchased 715,307 shares at an average price of $13.50 per share, generating $10.3 million of excess capital [25] - The Durbin impact is estimated to be about $13 million to $13.5 million annually [79] Q&A Session Summary Question: Loan growth expectations for the second half - Management expects a mix shift from consumer to commercial growth, with confidence in commercial pipelines remaining strong [27][29] Question: Margin expectations and loan rates - Continued margin expansion is anticipated, with loan rates expected to rise in line with Fed rate increases [30][31] Question: Auto loan growth outlook - Auto lending has shown strong performance, with no signs of slowdown, supported by a diversified dealer base [41][44] Question: Noninterest income and insurance business updates - The insurance business is performing well, providing value to commercial clients, while the brokerage business has balanced declines in trust income [51][52] Question: Buyback strategy and capital deployment - The company continues to buy back shares as a way to return capital to shareholders, with a moderate appetite for buybacks based on price sensitivity [61][63]