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First Commonwealth Financial(FCF) - 2024 Q3 - Earnings Call Transcript
FCFFirst Commonwealth Financial(FCF)2024-10-30 20:36
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Financial Data and Key Metrics Changes - Core Earnings Per Share for Q3 2024 were 0.31,withloansremainingflatanddepositsincreasing.Thenetinterestmargindecreasedby1basispointto3.560.31, with loans remaining flat and deposits increasing. The net interest margin decreased by 1 basis point to 3.56% due to declining rates in anticipation of a Fed rate cut [7][8] - The efficiency ratio was reported at 56.66%, with core pretax pre-provision net revenue of 50.9 million, which was within 1millionofanalystconsensus[8]BusinessLineDataandKeyMetricsChanges−Non−interestincomedecreasedbyonly1 million of analyst consensus [8] Business Line Data and Key Metrics Changes - Non-interest income decreased by only 683,000 despite a 3milliondropininterchangeincomeduetotheDurbinamendment,withexpectationsfornon−interestincomeinQ4tobebetween3 million drop in interchange income due to the Durbin amendment, with expectations for non-interest income in Q4 to be between 22 million and 24million[11]−TotalexpensesforQ3were24 million [11] - Total expenses for Q3 were 70.1 million, up 4.3millionfromthepreviousquarter,influencedbyone−timeitemstotalingapproximately4.3 million from the previous quarter, influenced by one-time items totaling approximately 1.8 million [12] Market Data and Key Metrics Changes - The bank achieved recognition as the number two SBA lender by dollars in Western Pennsylvania for the 2024 fiscal year [13] - Customer satisfaction scores reached five-year peaks, with overall scores at 90.4 and net promoter scores at 70.3, both exceeding industry benchmarks [13] Company Strategy and Development Direction - The company is focused on rebuilding the Centric portfolio while strategically reducing exposure to certain sectors and shifting to selling nearly all mortgage originations [14] - The management expressed confidence in future growth driven by new commercial banking talent and a growth mindset among regional presidents [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged disappointment in Q3 earnings per share but noted positive momentum in business and prospects for stronger growth ahead [14] - The credit performance from the Centric acquisition is expected to converge with the overall strong credit metrics of the bank, becoming a key source of future growth [15] Other Important Information - Tangible book value per share increased by 0.47to0.47 to 10.03, with share repurchases occurring at an average price of 16.83 [28] - The bank plans to pay down remaining borrowings when the Fed raises rates in November [19] Q&A Session Summary Question: What is the expected growth for the securities portfolio? - The company expects the securities portfolio to expand by about 100 million over the course of 2025 [30] Question: Can you provide details on the specific reserves taken this quarter? - Specific reserves included a 2.7millionreserveona2.7 million reserve on a 10 million construction loan and a 2.8millionreserveona2.8 million reserve on a 4.8 million term loan [32][33] Question: What is the outlook for charge-offs related to legacy credits? - The company anticipates resolution on legacy credits within the next quarter or two, with no significant incremental provisioning expected [36][37] Question: What is the expected trend for deposit costs? - Management indicated that the rate of increase in deposit costs is expected to decrease, with a potential plateau in the fourth quarter [69][70] Question: What is the appetite for deposit growth moving forward? - The company aims for a smooth, steady glide path in deposit growth, targeting a loan to deposit ratio of 92.5% [85]