First Commonwealth Financial(US:FCF)2022-01-27 00:48Financial Data and Key Metrics Changes - The net income for Q4 2021 was $34.8 million, an increase of $684,000 compared to Q3 2021 [10] - Core earnings per share improved to $0.37, a penny better than the previous quarter [10] - The core return on assets (ROA) was reported at 1.45% [10] - The pre-tax pre-provision ROA was 1.71% [10] - The allowance for credit losses (ACL) to loans ratio stood at 1.3% with low delinquency and charge-offs [10] Business Line Data and Key Metrics Changes - Loan growth excluding PPP was 11.2% in Q4 2021, with significant contributions from various segments [10] - Commercial and industrial (C&I) lending increased by $26 million, or 9.6% annualized, reaching $1.1 billion [11] - Commercial construction loans rose by $65 million from a base of $318 million [11] - Residential mortgage loans increased by $53 million, or 10.6%, totaling $2 billion [11] - Consumer loans grew by $23 million, or 9.4%, reaching $1 billion, with indirect auto loans contributing $15 million [11] Market Data and Key Metrics Changes - The company reported strong loan growth in three Ohio markets, exceeding 22% or $500 million for the year [12] - The company is now the number one SBA lender in Pittsburgh and a top lender in Ohio, with SBA gain on sales improving by $3.1 million to $6.8 million in 2021 [7] Company Strategy and Development Direction - The company is focused on multi-year investments in core systems, digital technologies, and expanding fee businesses [5] - The strategy includes a lift-out approach to enter the equipment finance space, with expectations for first origination in Q1 2022 [8] - The company aims for organic loan growth in the mid-to-high single digits, potentially approaching double-digit growth when including equipment finance [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth prospects and asset sensitivity positioning for net interest margin (NIM) expansion in 2022 [6] - The GAAP NIM is expected to rebound in the second half of 2022 after losing the benefit of PPP in the first half [14] - Management anticipates steady fee income in 2022, offsetting declines in mortgage gain on sale income with growth in other areas [16] Other Important Information - The company repurchased 2.1 million shares in 2021 at an average price of $14.29, with approximately $20 million remaining under the current repurchase authorization [9][17] - Digital engagement metrics showed significant growth, with mobile remote deposit capture items increasing by 43% in 2021 [9] Q&A Session Summary Question: Clarification on loan growth expectations - Management clarified that mid-to-high single-digit growth excludes equipment finance, which could add to overall growth [18] Question: Expectations on core NIM with rate hikes - A 25 basis point hike is expected to improve NIM by about 5 to 7 basis points [20] Question: Thoughts on share repurchase strategy - Management views share repurchases as an appropriate way to return capital, with plans to repurchase shares when prices are favorable [24] Question: Guidance on margin and excess liquidity usage - Management expects GAAP NIM to lose the benefit of PPP early in the year but anticipates convergence with core NIM by year-end [27] Question: Equipment finance growth expectations - The company expects equipment finance to contribute significantly to growth, with yields anticipated in the high fours [32] Question: Tax rate guidance for 2022 - The expected tax rate for 2022 is about 19% [57]