First Commonwealth Financial(FCF) - 2025 Q4 - Earnings Call Transcript

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, while net interest income rose by $47.2 million year-over-year to $427.5 million [4][8] - The provision for credit losses decreased by $4.3 million to $7 million, with non-performing loans (NPLs) increasing by four basis points to 94 basis points [6][8] Business Line Data and Key Metrics Changes - Fee income remained flat at 18% of total revenue, with gains in SBA offset by declines in wealth and mortgage services [6] - Core non-interest income for Q4 was $24.3 million, down $200,000 from the previous quarter, with an increase in SBA gain on sale income [15] - Core non-interest expense rose by $1.7 million to $74.3 million, primarily due to increased salaries and benefits [16] Market Data and Key Metrics Changes - Average deposit growth for the year was 6.1%, with significant contributions from money market accounts and CDs [9] - The company reported a total of $98 million in non-performing loans, including $39.2 million in total SBA loans [7] Company Strategy and Development Direction - The company aims to grow fee income through its regional banking model and maintain a focus on low-cost deposit growth [10][96] - A portfolio of approximately $225 million in commercial loans was designated as held for sale, with plans to reinvest proceeds into lower-yielding securities [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth in 2026, despite elevated payoffs in the previous year [28] - The company anticipates a near-term dip in NIM due to rate cuts, followed by gradual improvement, projecting an end-of-year NIM of around 4% for 2026 [12][61] Other Important Information - The company repurchased $23.1 million of its stock in Q4 2025, totaling 2.1 million shares for the year [7] - Management highlighted the retirement of Jane Grebenc, a key figure in the company's strategic transformations [10] Q&A Session Summary Question: Credit side impact and net charge-offs for 2026 - Management provided guidance of 25-30 basis points for charge-offs, with $1.5 million left to resolve on the dealer floor plan loan [20][21] Question: Loan growth expectations for 2026 - Management expects loan growth to continue at around 5-7%, with a strong pipeline in business banking and mortgage [28][29] Question: Buyback strategy and stock price sensitivity - The company will continue to repurchase shares using excess capital, with a sensitivity to stock price affecting the pace of buybacks [30][31] Question: NIM sustainability and deposit costs - Management indicated that NIM is projected to hover around 4% in 2026, with potential for further reductions in deposit costs [54][61]