First Commonwealth Announces Third Quarter 2022 Earnings Declares Quarterly Dividend

INDIANA, Pa., Oct. 25, 2022 (GLOBE NEWSWIRE) -- First Commonwealth Financial Corporation (NYSE: FCF) today announced financial results for the third quarter of 2022.

Financial Summary

(1) Core operating results are a non-GAAP measure used by management to measure performance in operating the business that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. A full reconciliation of non-GAAP financial measures can be found at the end of the financial statements which accompany this release.
(2) Reserve build/(release) represents the net change in the Company's allowance for credit losses (ACL) from the prior period.

Third Quarter 2022 Highlights

• Net income of $34.0 million and diluted earnings per share totaled $0.36, an increase of $3.2 million, or $0.03 per share from the previous quarter and unchanged from the third quarter of 2021
• Core pre-tax pre-provision net revenue (PPNR)(1) totaled $48.9 million, an increase of $6.5 million from the prior quarter and an increase of $5.9 million from the third quarter of 2021
• Operating leverage was positive during the third quarter of 2022
  • Core revenue(1) grew $10.2 million, or 10.3%, from the prior quarter
  • Core noninterest expense(1) increased $3.7 million, or 6.8%, from the prior quarter
• Total loans (excluding Paycheck Protection Program (PPP) loans) increased $238.1 million, or 13.3% annualized from the previous quarter, driven by strong commercial real estate, equipment finance and consumer loan categories
  • Year-to-date loan growth (excluding PPP loans) was $571.3 million, or 11.3% annualized
  • Average loans (excluding PPP loans) increased $238.7 million, or 13.5% annualized, from the previous quarter
  • Total PPP loans decreased $8.0 million from the previous quarter, resulting in a total PPP loan balance at September 30, 2022 of $4.9 million
• Record net interest income (FTE) of $82.6 million increased $8.7 million from the previous quarter due in part to a 38 basis point increase in the net interest margin, driven by a 35 basis point increase in the yield on loans (excluding PPP), which significantly offset a one basis point increase in the bank's cost of funds
• Noninterest income of $25.9 million (excluding net security gains) (non-GAAP) increased $1.4 million from the previous quarter and decreased $1.3 million from the third quarter of 2021
• Noninterest expense (excluding merger and acquisition, branch consolidation and COVID-19 related expenses) (non-GAAP) of $59.4 million increased $3.6 million from the previous quarter and increased $4.4 million from the third quarter of 2021
• Average deposits decreased $98.7 million, or 4.8% annualized compared to the prior quarter, partially offset by a $34.8 million, or 5.1% annualized increase in noninterest-bearing deposits
  • End of period deposits grew $24.1 million, or 1.2% annualized, from the previous quarter
• Total shareholders' equity decreased $26.6 million from the previous quarter due to a $45.3 million decrease in accumulated other comprehensive income (AOCI) resulting from the impact of higher interest rates on the fair value of the company's available for sale investment portfolio and interest rate swap agreements, partially offset by a $22.8 million increase in retained earnings
• On August 30, 2022, the Company announced the signing of a definitive agreement to acquire Harrisburg, PA based Centric Financial Corporation (Centric)
• First Commonwealth Bank (the Bank) has been recognized for the fourth consecutive year by Forbes as one of the World's Best Banks for 2022
• The Bank was recently named the #1 Small Business Association (SBA) lender in the SBA's designated Pittsburgh District for the second year in a row and ranked #2 overall across the state of Pennsylvania

Profitability

• Core return on average assets (ROAA) improved 15 basis points to 1.43% compared to the previous quarter and was unchanged from the third quarter of 2021
• Core pre-tax pre-provision ROA(1) for the quarter ended September 30, 2022 was 2.03% as compared to 1.77% in the prior quarter and 1.79% in the third quarter of 2021
• The net interest margin of 3.76% increased 38 basis points compared to the prior quarter and increased 53 basis points as compared to third quarter of 2021
• The core efficiency ratio(1) of 54.06% decreased 181 basis points from the previous quarter and 121 basis points from the third quarter of 2021

Strong regulatory capital position

• Bank-level Tier 1 Capital ratio of 11.4%, which represents $266.1 million in excess capital above the regulatory“well capitalized” requirement of 8.0%
• A total of 324,551 shares at a weighted average price of $13.63 were purchased during the third quarter of 2022 under the company's previously authorized share repurchase program. The remaining repurchase capacity under the current program was $5.9 million as of September 30, 2022

Asset quality

• The provision for credit losses was $5.9 million, an increase of $1.8 million compared to the previous quarter and an increase of $5.6 million from the third quarter of 2021
• The allowance for credit losses as a percentage of end-of-period loans (excluding PPP loans) was 1.31% compared to 1.32% in the previous quarter
• Total criticized loans decreased $7.5 million from the previous quarter
  • Total nonperforming assets increased $0.2 million from the previous quarter
• Net charge-offs on loans totaled $2.5 million, an increase of $0.9 million from the previous quarter
  • Net charge-offs as a percentage of average loans outstanding (excluding PPP loans, annualized) was 0.13% in the third quarter of 2022 as compared to 0.09% in the previous quarter

“Our results this quarter were highlighted by the significant expansion of our net interest margin which was enabled by our asset-sensitive balance sheet and valuable core deposit franchise. The quarter also displayed strong, well-balanced loan growth across both commercial and consumer categories,” stated T. Michael Price, President and Chief Executive Officer. “We also announced our plans to extend our footprint into Central and Southeastern Pennsylvania with the acquisition of Centric Financial Corporation. Centric is a well-led organization that aligns nicely with our culture and values, and I am excited about the future of our combined companies.” Price continued,“While the margin expansion is certainly a welcome tailwind, we are still mindful of the uncertain economic conditions that may be ahead of us and I believe we remain well positioned to turn challenges into opportunities and create long-term value for all of our stakeholders.”

Earnings

Net income for the third quarter of 2022 was $34.0 million, or $0.36 per share, compared to $30.8 million, or $0.33 per share in the second quarter of 2022 and $34.1 million, or $0.36 per share for the third quarter of 2021.

Net Interest Income and Net Interest Margin

Net interest income (FTE) of $82.6 million increased $8.7 million from the previous quarter and increased $11.7 million from the prior year quarter. The increase from the previous quarter was primarily due to a $7.2 million increase in income on variable and adjustable rate loans driven by higher interest rates.

The net interest margin for the third quarter of 2022 was 3.76%, an increase of 38 basis points from the previous quarter and an increase of 53 basis points from the third quarter of 2022. The increase from the previous quarter was due primarily to the aforementioned income on variable and adjustable rate loans and a $238.7 million increase in average loans (excluding PPP) partially offsetting a $287.8 million decrease in lower-yielding investment securities. The net interest margin was further aided by the Bank's overall cost of funds, which were 0.16% during the third quarter of 2022 as compared to 0.15% in the previous quarter.

Total average deposits decreased $98.7 million in the third quarter of 2022 as compared to the previous quarter, partially offset by a $34.8 million increase in noninterest-bearing deposits.

Total end-of-period deposits grew $24.1 million from the previous quarter.

Asset Quality

Provision expense in the third quarter of 2022 totaled $5.9 million as compared to $4.1 million in the previous quarter. The increase in provision expense during the quarter was primarily driven by strong loan growth, which resulted in a $5.3 million increase in the allowance for credit losses (ACL). The ACL was also impacted by an increase of $3.6 million in the quantitative model due to various inputs such as the expected unemployment rate, the Gross Domestic Product (GDP) forecast, prepayment speeds and max capacity levels. This increase was largely offset by a decrease in qualitative factors of $6.6 million, primarily due to lower reserve adjustments for COVID-related high risk portfolios.

At September 30, 2022, nonperforming loans totaled $35.7 million, which was unchanged from the previous quarter and a decrease of $2.4 million from the third quarter of 2021. Nonperforming loans represented 0.49% of total loans (excluding PPP loans) as compared to 0.50% and 0.58% for the periods ended June 30, 2022 and September 30, 2021, respectively.

At September 30, 2022, criticized loans totaled $139.3 million, a decrease of $7.5 million from the previous quarter.

During the third quarter of 2022, net charge-offs were $2.5 million as compared to $1.5 million in the previous quarter and $2.3 million in the third quarter of 2021. Net charge-offs as a percentage of average loans (excluding PPP, annualized) were 0.13%, 0.09% and 0.14% for the periods ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Noninterest Income and Noninterest Expense

Noninterest income (excluding net security gains) (non-GAAP) totaled $25.9 million for the third quarter of 2022, as compared to $24.5 million for the second quarter of 2022 and $27.2 million for the third quarter of 2021.

The $1.4 million increase from the previous quarter was primarily due to a $1.2 million increase in swap fee income. This increase was partially offset by a $0.4 million decrease in insurance and retail brokerage revenue.

Noninterest expense (excluding merger and acquisition, branch consolidation and COVID-19 related expenses) (non-GAAP) totaled $59.4 million for the third quarter of 2022, as compared to $55.8 million for the second quarter of 2022 and $55.0 million for the third quarter of 2021. The $3.6 million increase from the previous quarter was primarily the result of a $1.5 million increase in salaries and employee benefits driven, by a $0.5 million increase in wages, a $0.4 million increase in hospitalization expense, a $0.4 million increase in incentives and a $0.3 million reduction in deferred loan origination expenses. The increase during the quarter was also impacted by a $0.7 million increase in Pennsylvania shares tax due to a beneficial tax credit in the prior quarter.

The core efficiency ratio was 54.06% during the third quarter of 2022 as compared to 55.87% in the previous quarter and 55.27% in the third quarter of 2021.

Full time equivalent staff was 1,422 at September 30, 2022, 1,409 at June 30, 2022, and 1,409 at September 30, 2021. The increase from the previous quarter was partially the result of filling open positions within the company.

Dividends and Capital

First Commonwealth Financial Corporation declared a common stock quarterly dividend of $0.12 per share, which represents a 4.3% increase from the third quarter of 2021. The cash dividend is payable on November 18, 2022 to shareholders of record as of November 4, 2022. This dividend represents a 3.4% projected annual yield utilizing the October 24, 2022 closing market price of $13.94.

First Commonwealth's capital ratios for Total, Tier I, Leverage and Common Equity Tier I at September 30, 2022 were 14.5%, 12.1%, 10.1% and 11.2%, respectively. First Commonwealth's current capital levels exceed the fully phased-in Basel III capital requirements issued by U.S. bank regulators.

Conference Call

First Commonwealth will host a quarterly conference call to discuss its financial results for the third quarter of 2022 on Wednesday, October 26, 2022 at 2:00 PM (ET). The call can be accessed by dialing (toll free) 1-888-330-3181 conference ID # 4651379 or through the company's web page, A replay of the call will be available approximately one hour following the conclusion of the conference by dialing 1-800-770-2030 and entering the conference ID # 4651379. A link to the webcast replay will also be accessible on the company's webpage for 30 days.

About First Commonwealth Financial Corporation

First Commonwealth Financial Corporation (NYSE: FCF), headquartered in Indiana, Pennsylvania, is a financial services company with 119 community banking offices in 26 counties throughout western and central Pennsylvania and throughout Ohio, as well as commercial lending operations in Pittsburgh, Pennsylvania, and Canton, Cleveland, Columbus and Cincinnati, Ohio. The company also operates mortgage offices in Wexford, Pennsylvania, as well as Hudson and Lewis Center, Ohio. First Commonwealth provides a full range of commercial banking, consumer banking, mortgage, equipment finance, wealth management and insurance products and services through its subsidiaries First Commonwealth Bank and First Commonwealth Insurance Agency. For more information about First Commonwealth or to open an account today, please visit

Forward-Looking Statements

Certain statements contained in this release that are not historical facts may constitute“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute“forward-looking statements” as well. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of words such as“may,”“will,”“should,”“could,”“would,”“plan,”“believe,”“expect,”“anticipate,”“intend,”“estimate” or words of similar meaning. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including uncertainties regarding the impact of the COVID-19 pandemic, and could be affected by many factors, including, but not limited to: (1) the effects of the COVID-19 pandemic on First Commonwealth and its customers; (2) volatility and disruption in national and international financial markets; (3) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; (4) inflation, interest rate, commodity price, securities market and monetary fluctuations; (5) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which First Commonwealth or its customers must comply; (6) the soundness of other financial institutions; (7) political instability; (8) impairment of First Commonwealth's goodwill or other intangible assets; (9) acts of God or of war or terrorism; (10) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (11) changes in consumer spending, borrowings and savings habits; (12) changes in the financial performance and/or condition of First Commonwealth's borrowers; (13) technological changes; (14) acquisitions and integration of acquired businesses; (15) First Commonwealth's ability to attract and retain qualified employees; (16) changes in the competitive environment in First Commonwealth's markets and among banking organizations and other financial service providers; (17) the ability to increase market share and control expenses; (18) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (19) the reliability of First Commonwealth's vendors, internal control systems or information systems; (20) the costs and effects of legal and regulatory developments, the resolution of legal proceedings or regulatory or other governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory approvals; and (21) other risks and uncertainties described in this report and in the other reports that we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. Further, statements about the potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, clients, third parties and us.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements in this release. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Media Relations:
Jonathan E. Longwill
Vice President / Communications and Media Relations
Phone: 724-463-6806
E-mail:

Investor Relations:
Ryan M. Thomas
Vice President / Finance and Investor Relations
Phone: 724-463-1690
E-mail:

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