First Commonwealth Financial Q4 Earnings Call Highlights

First Commonwealth Financial NYSE: FCF highlighted fourth-quarter momentum and a stronger net interest margin during its fourth quarter 2025 earnings call, while also outlining expectations for 2026 and discussing a planned commercial loan sale tied to an earlier decision to exit the Philadelphia market.

Quarterly performance and balance sheet trends

President and CEO Mike Price said the company posted core EPS of $0.43 for the fourth quarter, along with a net interest margin (NIM) of 3.98%, core ROA of 1.45%, and a core efficiency ratio of 52.8%. Price said the quarter’s core EPS beat consensus estimates.

Average deposits increased 2.8% and total loans rose 1.2% during the quarter, which management attributed to seasonal factors and several larger commercial loan payoffs. Net interest income increased as the margin expanded, supported by what Price described as “healthy new commercial loan volume at good rates.” Deposit costs fell 1 basis point to 1.83%.

Core non-interest income was essentially flat, with gains in SBA activity offset by seasonal declines in wealth and mortgage. Price said fee income represented 18% of total revenue and emphasized the company’s long-term focus on expanding fee income through its regional banking model.

Net interest margin outlook and key drivers

CFO Jim Reske said spread income rose $2.1 million from the prior quarter, driven primarily by a 6 basis point increase in NIM. He noted that earning-asset yields rose 3 basis points while funding costs fell 3 basis points.

Looking ahead, Reske said NIM guidance was “little changed” from the prior quarter. Management expects a near-term dip as variable-rate loans reflect fourth-quarter rate cuts, followed by gradual improvement through 2026, ending the year around 4%. In response to analyst questions, Reske estimated the first-quarter dip could be 5 to 10 basis points, with a general upward drift thereafter.

Reske also explained that fourth-quarter margin strength included offsets to the impact of rate cuts, including payoffs and paydowns in loans that had previously been on non-accrual status. He quantified the NIM benefit from those non-accrual-related factors at roughly 3 basis points for the quarter.

During the Q&A, management discussed pricing on new production and competitive dynamics. Price said recent production included commercial variable loans around 7.3% in the fourth quarter. Chief Lending Officer Mike McCuen said the bank’s focus on lending to family-owned, owner-operated businesses has contributed to “healthy growth” and characterized it as a “prime flow space business.” McCuen said commercial real estate spreads have become more compressed given aggressive competition from agency and insurance markets, and management emphasized maintaining discipline on structure, term, and recourse. He added that the construction loan portfolio was up about $120 million over the last year, which management expects will support future funding as projects draw down and convert.

Philadelphia portfolio marked held for sale

Reske said that at year-end the bank designated approximately $225 million in commercial loans as held for sale. The portfolio was largely originated in the Philadelphia MSA, a market the bank had “previously decided to exit” to focus resources elsewhere. Following communication to borrowers, the company received an approach from another bank to purchase the portfolio; discussions remain ongoing.

If the sale is completed, Reske said the company expects to reinvest proceeds into lower-yielding securities, with an estimated rate differential of about 1.5% versus the loans sold. Management also said the transaction would improve liquidity and capital ratios. In the Q&A, Reske added that the portfolio move should lower the bank’s loan-to-deposit ratio (excluding the held-for-sale loans) into the low 90s, which he said supports less aggressive deposit pricing over time.

Management characterized the sale as a “one-off,” tied to the earlier decision to withdraw from the market, and said there were no meaningful additional operational expense reductions expected because the bank had already exited physical locations in the area. Reske also said the accounting impacts to reserves and marks were reflected in the fourth quarter financials.

Credit: NPLs, reserves, and the dealer floor plan resolution

Price said the provision for credit losses decreased $4.3 million from the prior quarter to $7 million. He attributed the elevated third-quarter provision to the ongoing resolution of a previously disclosed dealer floor plan credit, which required no further reserve in the fourth quarter.

Non-performing loans (NPLs) rose 4 basis points to 94 basis points of loans. Management noted that NPLs include both the unguaranteed and the government-guaranteed portions of SBA loans owned by the bank. As of Dec. 31, 2025, the company reported $98 million of NPLs, including $39.2 million of total SBA loans, of which $31.2 million was government guaranteed. Price said that of the 94 basis points of NPLs, 32 basis points is guaranteed.

Chief Credit Officer Brian Sohocki said the dealer floor plan loan ended the year with a $2.5 million outstanding balance and was nearing resolution as liquidation continued. He said there was no additional reserve and that the quarter included an $80,000 release. Sohocki also disclosed a $2.1 million charge-off tied to the floor plan credit in the fourth quarter, which he said equated to 47 basis points annualized. Management reiterated its customary net charge-off guidance range of 25 to 30 basis points.

On reserves, Sohocki said the company’s reserve levels remain “strong,” citing a 1.32% level and noting that the bank has maintained qualitative overlays and responded to emerging stress where identified.

Expenses, capital return, and leadership update

Reske said core non-interest expense increased $1.7 million from the prior quarter to $74.3 million, largely due to salaries and benefits as the bank filled open positions. Management also referenced some one-time items in the quarter, including contract terminations, that are not expected to repeat. Reske said the company still achieved positive operating leverage versus the prior quarter and expects to limit operating cost increases to approximately 3% year-over-year.

On capital return, Price said the company repurchased $23.1 million of stock in the fourth quarter, or 1.4 million shares at an average price of $15.94. For full-year 2025, the company repurchased 2.1 million shares. Reske said remaining capacity under the current program was $22.7 million at Dec. 31, 2025, and added that the board authorized an additional $25 million in repurchase authority. He said repurchases are funded from “excess capital generation,” which effectively caps activity at about $25 million to $30 million per quarter, though management emphasized price sensitivity and flexibility in timing.

Price also announced that Bank President and Chief Revenue Officer Jane Grebenc will retire at the end of March, thanking her for her leadership and contributions to the company’s strategic transformation.

About First Commonwealth Financial NYSE: FCF

First Commonwealth Financial Corporation, headquartered in Indiana, Pennsylvania, is a bank holding company whose primary subsidiary is First Commonwealth Bank. Established in 1889 as Indiana National Bank, the company has grown through a combination of organic expansion and strategic acquisitions to build a diversified platform of commercial banking, retail banking and wealth management services.

First Commonwealth offers a comprehensive suite of financial products, including deposit accounts, personal and business lending solutions, mortgage origination and servicing, treasury management, and trust and investment services.

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