FIRST COMMONWEALTH FINANCIAL CORPORATION NYSE: FCF
3Q 2023 Earnings Release Webcast Presentation
October 25, 2023
2
FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements about First Commonwealth's future plans, strategies and financial performance. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may." Such statements are based on assumptions and involve risks and uncertainties, many of which are beyond our control. Factors that could cause actual results, performance or achievements to differ from those discussed in the forward-looking statements include, but are not limited to:
- economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business;
- future credit quality and performance, including our expectations regarding future loan losses and our allowance for credit losses
- the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry;
- management's ability to effectively execute its business plans;
- mergers and acquisitions, including costs or difficulties related to the integration of acquired companies;
- the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period;
- the effect of changes in accounting policies and practices;
- changes in consumer spending, borrowing and saving and changes in unemployment;
- changes in customers' performance and creditworthiness;
- the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
- current and future economic and market conditions, including the effects of changes in housing prices, fluctuations in unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;
- the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 ("COVID-19"), global pandemic, and the impact on the performance of our loan and lease portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products;
- our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
- financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
- the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;
- the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;
- a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks;
- the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
- our ability to develop and execute effective business plans and strategies; and
- other risks and uncertainties described in the reports that First Commonwealth files with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.
Forward-looking statements speak only as of the date on which they are made. First Commonwealth undertakes no obligation to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
3
3Q 2023 Earnings Release Webcast Presentation
THIRD QUARTER 2023 HIGHLIGHTS
Highlights
$55.7 million
Core Pre-taxpre-provision income(1)
1.95%
Core PTPP ROAA(1)
1.51%
Reserve coverage ratio
$4.4 billion
Available liquidity
$259.1 million
Excess capital(2)
7.7%
TCE ratio
Diversified balance sheet and revenue streams continue to improve the earnings power of the company
- Net interest income (FTE) of $98.1 million was unchanged from the previous quarter
- Net interest margin was 3.76%
- Average deposits grew $48.4 million, or 2.1% annualized from the previous quarter
- Total loans grew $101.9 million, or 4.6% annualized from the previous quarter
- Fee income of $24.9 million increased $0.4 million from the previous quarter primarily due to a $0.4 million increase in Trust revenue
- Core noninterest expense of $67.0 million increased $1.0 million from the previous quarter, due primarily to a $0.7 million increase in operational losses associated with the implementation of a new system for debit card charge-offs
- Tangible book value per share increased $0.11, or 5.4% annualized from the previous quarter
(1) | Please refer to the appendix for a reconciliation of non-GAAP measures | |
(2) | Represents excess capital above the bank-level Tier 1 Capital regulatory "well capitalized" requirement of 8.0% | 4 |
3Q 2023 Earnings Release Webcast Presentation
NET INTEREST INCOME AND NET INTEREST MARGIN
Net Interest Income(1)
Yield/Cost Trends(1)
- Net interest income (FTE) of $98.1 million was flat to LQ and up by $15.4 million YoY
- $1.6 billion increase in average interest earning assets YoY
- Includes $1.0 billion from the Centric acquisition
- Net interest margin of 3.76% decreased 9bps from LQ and flat YoY
- Yield on loans increased 21bps to LQ
- Cost of deposits was 1.42% in the current quarter compared to 1.14% LQ
- Cost of funds was 1.70% during the current quarter compared to 1.38% LQ
- Approximately $4.5 billion, or 51%, of the $8.9 billion loan portfolio is variable
-
Average duration of the loan portfolio is
3.1 years
-
Average duration of the loan portfolio is
(2)
$ in millions
(1) Taxable equivalent5
(2) Please refer to the appendix for a reconciliation of non-GAAP measures
3Q 2023 Earnings Release Webcast Presentation
LOANS
Average Loans(1)
Average
Average loans increased $195.7 million from LQ and $1,622.9 million YoY
The yield on loans increased 21bps from LQ
(2)
Period-end Loans(1) | Period-end | ||
| Total loans(1) increased $118.7 million from the | ||
$8,816 | $8,935 | previous quarter, or 5.3% annualized | |
| Mortgage loans increased $56.8 million, offset by a | ||
$7,363 | |||
$33.4 million decrease in 1-4 family construction | |||
loans | |||
| Commercial real estate loans increased $45.1 | ||
million from LQ | |||
| Equipment finance loans increased $36.0 million | ||
from LQ | |||
(3) | |||
$ in millions | |||
(1) Includes loans held for sale | 6 | ||
(2) Taxable equivalent yield |
- Includes $190, $154 million and $44 million Equipment Finance Loans in 3Q23, 2Q23 and 3Q22, respectively
3Q 2023 Earnings Release Webcast Presentation
DEPOSITS
Average Deposits
Average
Average deposits increased $48.4 million, or 2.1% annualized, from LQ
Average time deposits grew $123.8 million, partially offset by a $61.7 million decrease in noninterest bearing deposits and a $13.7 million decrease in interest-bearing demand and savings deposits
The total cost of deposits increased 28bps from
LQ
Period-end Deposits | Period-end |
Total period-end deposits increased $94.8 million, or 4.1% annualized from LQ
Noninterest-bearing deposits currently comprise 27.4% of total deposits
$ in millions
7
3Q 2023 Earnings Release Webcast Presentation
NONINTEREST INCOME
3Q23 | 2Q23 | Change from | |||||
3Q22 | 2Q23 | 3Q22 | |||||
Interchange | $7.2 | $7.4 | $7.0 | ($0.2) | $0.2 | ||
Service charges | 5.6 | 5.3 | 5.2 | 0.3 | 0.4 | ||
Trust | 2.9 | 2.5 | 2.8 | 0.4 | 0.1 | ||
Retail brokerage | 1.3 | 1.2 | 1.0 | 0.1 | 0.3 | ||
Insurance | 1.0 | 1.1 | 1.0 | (0.1) | 0.0 | ||
BOLI | 1.2 | 1.2 | 1.4 | 0.0 | (0.2) | ||
Gain on sale of mortgage loans | 1.3 | 1.3 | 1.5 | 0.0 | (0.2) | ||
Gain on sale of SBA loans | 0.9 | 1.8 | 1.1 | (0.9) | (0.2) | ||
Gain on sale of Assets | 0.1 | 0.1 | 0.0 | 0.0 | 0.1 | ||
SWAP fees | 0.5 | 0.3 | 2.3 | 0.2 | (1.8) | ||
Other fees | 2.9 | 2.2 | 2.6 | 0.7 | 0.3 | ||
Total fee income | $24.9 | $24.4 | $25.9 | $0.5 | ($1.0) | ||
Gain on sale of securities | (0.1) | 0.0 | 0.0 | (0.1) | (0.1) | ||
Derivative mark-to-market | 0.0 | 0.1 | 0.0 | (0.1) | 0.0 | ||
Total noninterest income | $24.8 | $24.5 | $25.9 | $0.3 | ($1.1) | ||
- Fee income increased $0.5 million from LQ and decreased $1.0 million YoY
- Trust income increased $0.4 million and service charges increased $0.3 million from LQ
- Gain on sale of mortgage loans was flat from LQ and decreased $0.2 million YoY
- 3Q23 mortgage originations of $88.6 million increased $2.5 million from LQ and decreased $19.7 million YoY
- Fee income represented 20.2% of total operating revenue(1)
(1) Please refer to the appendix for disclosures regarding non-GAAP measures | 8 |
$ in millions |
3Q 2023 Earnings Release Webcast Presentation
NONINTEREST EXPENSE
3Q23 | 2Q23 | 3Q22 | Change from | ||||
2Q23 | 3Q22 | ||||||
Salaries and benefits | |||||||
$35.6 | $36.7 | $32.5 | ($1.1) | $3.1 | |||
Occupancy | 4.8 | 4.8 | 4.6 | 0.0 | 0.2 | ||
Furniture and equipment | 4.4 | 4.3 | 4.0 | 0.1 | 0.4 | ||
PA shares tax | 1.6 | 1.2 | 1.6 | 0.4 | 0.0 | ||
Data processing | 3.9 | 3.8 | 3.7 | 0.1 | 0.2 | ||
Professional fees | 1.6 | 1.2 | 1.2 | 0.4 | 0.4 | ||
FDIC insurance | 1.9 | 1.3 | 0.8 | 0.6 | 1.1 | ||
Operational losses | 1.6 | 0.9 | 0.8 | 0.7 | 0.8 | ||
Loss on sale or write-down of assets | 0.1 | 0.0 | 0.1 | 0.1 | 0.0 | ||
Other operating expenses | 10.1 | 10.5 | 9.4 | (0.4) | 0.7 | ||
Total operating expense | $65.7 | $64.7 | $58.7 | $1.0 | $7.0 | ||
Intangible amortization | 1.3 | 1.3 | 0.7 | 0.0 | 0.6 | ||
Merger Expenses | 0.4 | (0.1) | 0.4 | 0.5 | (0.0) | ||
Branch Consolidation | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
Total noninterest expense | $67.4 | $65.9 | $59.9 | $1.5 | $7.5 |
- Total noninterest expense increased $1.5 million from LQ while total operating expense increased $1.0 million
- Operational losses increased $0.7 million from LQ driven by a $0.9 million recognition of identified losses as part of the implementation of a new debit card charge-off processing system
- FDIC insurance increased $0.6 million from LQ due to the Centric acquisition
- Salaries and benefits decreased $1.1 million from LQ due to a $1.0 million decrease in hospitalization expense
- FTEs of 1,481 decreased 2 from LQ
(1) Please refer to the appendix for disclosures regarding non-GAAP measures
9
3Q 2023 Earnings Release Webcast Presentation
CREDIT QUALITY
Provision Expense and Net Charge-offs | Provision expense of $5.9 million |
increased $3.1 million from LQ and was | |
flat YoY |
− The increase in the provision expense was primarily driven by loan growth and an additional $4.1 in specific reserves for an updated appraisal on a nonaccrual commercial loan
(1) | − The allowance for credit losses as a | |
percentage of end-of-period loans | ||
Nonperforming Assets | was 1.51%, which is a decrease of | |
1bps from LQ |
Nonperforming loans of $47.9 million decreased $0.1 million from LQ and increased $12.2 million YoY, primarily as the result of acquired NPLs
(1) Net charge-offs as a percentage of period-to-date average loans, annualized
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
First Commonwealth Financial Corporation published this content on 24 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2023 14:07:39 UTC.
