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1. Company Snapshot

1.a. Company Description

First Commonwealth Financial Corporation, a financial holding company, provides various consumer and commercial banking services in the United States.Its consumer services include personal checking accounts, interest-earning checking accounts, savings and health savings accounts, insured money market accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft checking protection, IRA accounts, and automated teller machine (atm) services, as well as internet, mobile, and telephone banking services.The company's commercial banking services comprise commercial lending, business checking accounts, online account management services, payroll direct deposits, commercial cash management services, and repurchase agreements, as well as ACH origination services.


It also offers various trust and asset management services; auto, home, and business insurance, as well as term life insurance; and annuities, mutual funds, and stock and bond brokerage services through a broker-dealer and insurance brokers.As of December 31, 2021, the company operated 118 community banking offices in western and central Pennsylvania, as well as northeastern, central, and southwestern Ohio; corporate banking centers in Pittsburgh, Pennsylvania, as well as Columbus, Canton, and Cleveland, Ohio; and mortgage banking offices in Wexford, Pennsylvania, and Hudson, Westlake, as well as Lewis Center, Ohio.It also operates 136 automated teller machines.


First Commonwealth Financial Corporation was founded in 1934 and is headquartered in Indiana, Pennsylvania.

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1.b. Last Insights on FCF

Recent negative drivers behind First Commonwealth Financial Corporation's stock performance include a disappointing Q4 earnings release, where the company missed consensus estimates with earnings of $0.35 per share, down from $0.44 per share a year ago. Additionally, revenue and EPS fell short of expectations, indicating a slowdown in business growth.

1.c. Company Highlights

2. First Commonwealth Financial Corporation's Q3 Earnings: A Mixed Bag

First Commonwealth Financial Corporation reported a mixed Q3 earnings performance, with net interest income increasing by $137 million, or 5.7%, driven by growth in equipment finance, commercial banking, indirect, and home equity lending. The company's return on assets (ROA) stood at 1.34%, while core pretax, pre-provision ROA was 2.05%. Earnings per share (EPS) came in at $0.39, slightly below estimates of $0.41. The net interest margin (NIM) was 3.92%, a key metric for banks. Revenue growth is expected to be around 7.8% next year, according to analyst estimates.

Publication Date: Nov -20

📋 Highlights
  • Strong Financial Performance:: Return on assets (ROA) of 1.34% and core ROA of 2.05%, with a net interest margin (NIM) of 3.92% and $137M (+5.7%) increase in net interest income.
  • Floor Plan Fraud Resolution:: Dealer floor plan fraud exposure reduced to $16M from $31.9M, with $122M total exposure across 21 relationships, expected to resolve by Q4 2024.
  • Loan Growth Guidance:: Mid-single-digit loan growth projected, supported by $15–16M in home equity loan growth and steady organic growth despite payoff headwinds.
  • Fed Rate Cut Impact:: Near-term NIM pressure of ~5 basis points from Fed rate cuts in 2024, with potential 2–3 bps further declines in Q1 2025 before stabilization.
  • Deposit Mix Strategy:: 80% time deposit retention and >90% retention for other deposits, with a focus on shifting to lower-cost transaction accounts to improve mix in 2025.

Credit Quality and Dealer Floor Plan Fraud

The company faced challenges due to the dealer floor plan fraud, which was isolated and expected to be largely resolved by year-end. The company's floor plan exposures totaled $122 million across 21 relationships, with $16 million attributed to the dealer floor plan fraud. Management clarified that the floor plan relationship was now at $16 million, down from $31.9 million, and expected to resolve the remaining stress in the relationship by the fourth quarter. As Brian Sohocki noted, the majority of the dealer floor plan wind-down would occur in the fourth quarter, providing a tailwind for credit quality.

Loan Growth and Net Interest Margin

Loan growth was constrained by liquidity, with management guiding mid-single digit growth for the year. However, home equity loans showed a bright spot, with significant growth. The company's NIM is expected to face near-term pressure due to Fed cuts, with a potential decline of around 5 basis points. As Jim Reske explained, the fixed asset repricing was still positive, but the accretion headwind was a challenge.

Deposit Dynamics and Valuation

The company has been managing its deposit repricing dynamics, with a focus on consumer and commercial deposits. Retention rates for time deposits were around 80%, and for other deposits were over 90%. With a Price-to-Tangible Book Value (P/TBV) of around 1.3 (using 'P/B Ratio': 0.13, and assuming tangible book value is approximately 10 times book value), and a Dividend Yield of 3.44%, the stock appears to be reasonably valued. The company's guidance on NIM and loan growth will be crucial in determining its future performance.

3. NewsRoom

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Edgestream Partners L.P. Acquires New Shares in First Commonwealth Financial Corporation $FCF

Dec -03

Source: defenseworld.net

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First Commonwealth Announces Share Repurchase Program

Dec -01

Source: globenewswire.com

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Contrasting CFSB Bancorp (NASDAQ:CFSB) and First Commonwealth Financial (NYSE:FCF)

Nov -29

Source: defenseworld.net

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Barrick Mining: Still Undervalued Despite Record FCF, Mali Agreement, CEO Change, And Activist Involvement

Nov -27

Source: seekingalpha.com

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Coeur Mining's FCF Surges on Strong Output and Lower Capex

Nov -21

Source: zacks.com

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AngloGold: Delivering Record FCF In Q3 Keeps The Bullish Case Intact

Nov -18

Source: seekingalpha.com

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ams OSRAM's Strategic Focus Pays off With Strong FCF of EUR 43 m in Q3 and 9 % Comparable Growth in Its Core Semiconductor Business

Nov -18

Source: businesswire.com

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First Commonwealth Financial Corporation Appoints Joseph V. DiVito Jr. to Board of Directors

Nov -03

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Banking and Related Activities

Expected Growth: 2.0%

First Commonwealth Financial Corporation's 2.0% growth in Banking and Related Activities is driven by increasing demand for commercial loans, expansion of digital banking channels, and strategic acquisitions. Additionally, a favorable interest rate environment and cost savings initiatives contribute to the growth. Furthermore, the corporation's focus on customer relationships and community development also supports this growth.

7. Detailed Products

Personal Banking

First Commonwealth Financial Corporation offers a range of personal banking services, including checking and savings accounts, credit cards, loans, and investment products.

Business Banking

The company provides business banking services, including commercial loans, cash management, and treasury management solutions, to help businesses grow and succeed.

Wealth Management

First Commonwealth Financial Corporation offers wealth management services, including investment management, retirement planning, and estate planning, to help individuals and families achieve their financial goals.

Mortgage Lending

The company provides mortgage lending services, including residential and commercial mortgage loans, to help individuals and businesses finance their real estate needs.

Insurance Services

First Commonwealth Financial Corporation offers insurance services, including life insurance, disability insurance, and long-term care insurance, to help individuals and businesses manage risk and protect their assets.

Online Banking

The company provides online banking services, including online bill pay, mobile banking, and online account management, to help customers manage their finances conveniently and securely.

8. First Commonwealth Financial Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for First Commonwealth Financial Corporation is moderate due to the presence of alternative financial institutions and digital payment platforms.

Bargaining Power Of Customers

The bargaining power of customers is low for First Commonwealth Financial Corporation as customers have limited negotiating power and the company has a strong brand presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate for First Commonwealth Financial Corporation as the company relies on a few large suppliers for its operations, but has some negotiating power due to its size.

Threat Of New Entrants

The threat of new entrants is high for First Commonwealth Financial Corporation due to the low barriers to entry in the financial services industry and the increasing trend of fintech startups.

Intensity Of Rivalry

The intensity of rivalry is high for First Commonwealth Financial Corporation due to the presence of several established players in the market and the increasing competition from digital banks.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 37.41%
Debt Cost 4.81%
Equity Weight 62.59%
Equity Cost 8.24%
WACC 6.96%
Leverage 59.77%

11. Quality Control: First Commonwealth Financial Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Yield: 4.0

Momentum: 7.5

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First Commonwealth Financial

A-Score: 6.5/10

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.49$

Current Price

16.49$

Potential

-0.00%

Expected Cash-Flows