First Commonwealth Financial Q1 Earnings Call Highlights

Key Points

• First Commonwealth reported Q1 net income of $37.5 million ($0.37/share), missing the consensus of $0.40, as net interest income fell to $109.3 million driven by a $210 million commercial loan sale and elevated commercial loan payoffs (~$630 million), with higher provision expense also weighing on results.
• Management raised its margin outlook, expecting net interest margin to be about 3–5 basis points higher per quarter than prior guidance and to drift to the low-4% range by Q4, citing fewer expected Fed cuts and the May 1 expiration of $150 million in macro swaps, while noting deposit behavior is the biggest wildcard.
• Credit and capital actions included a higher provision for loan losses of $10.7 million (with $9.6 million of specific reserves for three large credits and NPLs at 0.98%), alongside about $22.7 million of share repurchases, a $0.02 dividend increase, and improved CET1 to 12.5%.

First Commonwealth Financial NYSE: FCF reported first-quarter 2026 net income of $37.5 million, or $0.37 per share, President and CEO Mike Price said on the company’s earnings call. Price noted the result compared with a consensus earnings estimate of $0.40, while management pointed to higher loan payoffs, a commercial loan sale, and a higher provision expense as key factors in quarter-to-quarter performance.

Earnings shaped by loan sale, higher payoffs, and margin pressure

Net interest income fell $4.2 million from the prior quarter to $109.3 million, Price said, citing the sale of $210 million of Eastern Pennsylvania commercial loans and a $74.2 million decline in loan balances due to “heightened payoffs.” Commercial loan repayments totaled $630 million in the quarter, up roughly $150 million from the first quarter of 2025, including 18 commercial real estate (CRE) projects that were refinanced or sold, representing about $240 million in payoffs, Price said.

Chief Financial Officer Jim Reske said about $2.6 million of the net interest income decline reflected fewer days in the quarter. He added that the remainder was driven by lower earning asset levels and the impact of prior-quarter Federal Reserve rate cuts on the company’s variable-rate loan portfolio.

Net interest margin (NIM) decreased to 3.92% from 3.98% in the fourth quarter, which Reske said was consistent with prior guidance. He also noted that fourth-quarter NIM benefited by about three basis points from “unique items,” including recognition of accrued interest from payoffs of loans that had previously been on non-accrual status.

Updated margin outlook tied to fewer rate cuts and swap expiration

Looking ahead, Reske said the company’s outlook now assumes fewer rate cuts than previously expected, which should help keep variable-rate loans from repricing downward while allowing fixed-rate loans and securities to reprice upward. He highlighted the expiration of $150 million in macro swaps on May 1, which he said would allow those loans to float to higher rates “than expected” in a higher-rate environment.

Based on what Reske called a “new one-cut base case,” the company revised its NIM guidance slightly higher, expecting NIM to be “about three to five basis points higher each quarter than before,” drifting to the low-4% range by the fourth quarter of the year. In response to analyst questions, Price and Reske said they expect NIM to end the year “a little over 4%,” with deposit behavior identified as the biggest variable in the margin forecast.

Price said the company’s lower loan-to-deposit ratio—reported at 90.9%—provides flexibility to test lower deposit rates over the next several quarters. He said management expects to be cautious as it adjusts deposit pricing, pointing to promotional activity that has supported deposit gathering and new checking account acquisition.

Expenses, fees, and capital actions

Non-interest expense rose $1.2 million from the prior quarter to $75.5 million, Price said, driven by higher salaries and incentives and $500,000 of prepayment fees tied to the repurchase of long-term debt. Reske said quarterly non-interest expense should hover in a $74 million to $76 million range this year, noting some quarter-to-quarter variability.

Fee income was “little changed” from the prior quarter, Reske said, and included about $435,000 recognized when several loans in the held-for-sale portfolio paid off at par and the difference between par and the prior mark was recorded as fee income. Reske added that wealth, mortgage, and SBA fees were “up significantly” compared with the same quarter a year earlier, and he guided to fee income of $24 million to $25 million per quarter this year.

On capital returns, Reske said the company repurchased about $22.7 million of stock during the quarter at a weighted average price of $17.67, and clarified that $25 million remains in repurchase authorization (not the $18.4 million figure shown in the earnings release). Reske said the company intends to continue share repurchases in the second quarter. The company also increased its dividend by $0.02, marking the 11th consecutive year of dividend increases, Reske said.

Reske reported that tangible book value per share rose from $11.22 to $11.34 during the quarter, while the company’s CET1 ratio improved from 12.1% to 12.5% and its tangible common equity ratio remained at 9.7%.

Credit: higher provision tied to specific reserves and isolated credits

The provision for loan losses increased $3.7 million from the linked quarter to $10.7 million, Price said, driven by $9.6 million of specific reserves for three larger credits, including one in Eastern Pennsylvania. Non-performing loans remained elevated, with non-performing loans to loans at 0.98% in the first quarter. Price said three previously discussed relationships totaling $20.5 million moved to non-performing status during the quarter, with $9.6 million of associated specific reserves.

Price also noted that of $92.3 million in non-performing loans, $28.1 million—or 30.4%—is guaranteed by the SBA.

In response to questions about charge-offs and post-quarter-end activity, management said the company recorded $2.8 million in charge-offs in the fourth quarter when certain loans were moved to held for sale, and that about $400,000 was reversed through the income statement in the first quarter when loans paid off at par. Management also described two credits that were non-performing at quarter-end: one was exited via a loan sale with a charge-off “just under $150,000” beyond reserved amounts, and the second paid off at par.

Reske agreed with an analyst’s framing that, given the resolution of certain credits after quarter-end and management’s view that it is not seeing “systematic stress” across the portfolio, there may be room for provision to “drift back down a little bit,” while emphasizing that outcomes will depend on credit marks and reserves as the year progresses.

Loan growth commentary, liquidity positioning, and leadership change

On loan growth, Price said first-quarter production topped $900 million, about $10 million higher than the first quarter of 2025, but elevated payoffs offset that production. He said management believes payoff activity has “slowed somewhat” in the last 30 days and reiterated confidence in achieving the company’s historical guidance of “mid-single” loan growth.

Price highlighted HELOC and home equity loan activity as a “bright spot,” and discussed growth in small business and business banking, noting the company has added bankers and enhanced credit processes. Price also said the company’s equipment finance business has “room to run” for another year or so and has met credit projections so far, while the team has been pivoting toward more end-market leasing with commercial clients.

Reske and Price said liquidity strengthened as the company paid off “virtually all borrowings” and managed excess cash following the held-for-sale loan execution. Reske said some cash is being held to anticipate seasonal public-funds deposit outflows in the second quarter, with the company also considering securities purchases if loan growth does not absorb the liquidity.

Price also said the company’s Centric Bank acquisition has exceeded financial expectations and contributed to strong loan and deposit growth at Centric in the second quarter, while residential mortgage delivered a strong first quarter in both volume and gain-on-sale income. He added that the retail bank posted its highest Net Promoter and customer satisfaction scores since tracking began.

Finally, Price announced that Chief Information Officer Norm Montgomery will retire after 37 years with the company, and said Ryan Gorney has been hired as Montgomery’s replacement.

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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